I am not trying to debate, but trying to understand your points better. so here goes
a. competitive intensity: Why do you think this has really changed ? NBFCs operate mostly in the retail segment and even though PSU could not grow the book, they had the option to reduce the corporate book and grow the retail one (while keeping the total book same or even shrinking it). PSU have a better CAR or lower NPA, but that does not impact the lending/underwriting for the retail sector. Has anything changed for them at the local level to improve this ?
b. supplier power : Has this not always been the case ? Any NBFC, MFI etc has always been disadvantaged compared to PSU and other banks. This is partly balanced out by the SLR portion. Inspite of this NBFCs have been grown all these years (even before the recent spurt). I dont think the differentiator for most NBFC was the rate of interest in any case ?
c. Customer power : Credit scoring, Fintech and other such data driven options are available in most developed market. Inspite of this niche financial players have flourished for different reasons. Why would NBFC not be able to adopt the technology and use it to their advantage too ?
d. substitution : Again this is more developed in US and china, and the private/ nimble players have adopted this better than the larger banks.
My reason for listing the above is to try to understand what has been the change in the competitive dynamics for the NBFC sector as a whole versus the PSU/Large banks. I am really not able to find a new factor. Deposit cost has always been a disadvantage, which NBFC have compensated via operating in niches, under writing better and have better distribution and service standard.
I am not trying to come up a reasoning for the recent drop in valuations which may or may not be justified. What i am trying to understand is what has really changed in the financial services space that will allow the PSU banks to regain their competitiveness.