Amid economic slowdown, world's most profitable banks can be found in India

Indian private-sector banks are also among the most richly valued

India’s economic and credit slowdown is revealing the strengths and weaknesses of its banking sector.

Roiled by unprecedented frauds and surging bad debt, the nation’s state-run banks have returned the least to investors this year. However, investors’ belief in the potential of Asia’s No. 3 economy shows in the fact that its newest lenders offer the best returns, and a clutch of private Indian banks are among the world’s most expensive.

For instance, AU Small Finance Bank Ltd.’s return-on-equity, a measure of profitability, was 56 percent compared with about 15 percent for China Construction Bank, 11 percent for