An investor who does not have understanding of the banking space and who cannot handle volatility should avoid this thematic funds. At present, banking sector is facing twin problems of rising non-performing assets (NPAs) and weak corporate governance practices. While the problem is more acute in the public sector banking space, some large private sector banks, too, are embroiled in issues related to corporate governance. “Private sector banks focused on retail segment have handled the credit cycle well and are well capitalised to make the most from the growth in credit demand. But, RBI’s recent clampdown on various loan restructuring schemes will further increase the provisioning burden for stressed banks and impact their profitability in the near term,” said Manish Kothari, Director and Head of Mutual Funds, Paisabazaar.com. However, experts feel steps like these would lead to cleaner balance sheets in the long term for banks. To capitalise on the long term growth opportun...