Festive Season Credit encourages economy (India’s Banking growth continues)

Credit in the Indian Economy increased by over a INR 1 Tln to 41.93 Tln or 41.93 Lakh crores since September, half of this having come from Sept 23 to Oct 07. According to the RBI data book (ET report) the jump is in retail lending and lending to NBFCs. This report stays short as we are quite short staffed ( total hands: 1)  and need analysis support soon. Meanwhile with the Debt Crisis taking a stranglehold on Europe and then in China, India’s growth rates exceeding 18% targets to 19.7% year on year for Oct 07, 2011 mean that India’s rate hikes will continue till the first half of 2012. If what MSA ( Plan Comm) says can be linked back to our Oil basket, we will be saying more than $105 ($110) per barrel till at least March 2012. 

Our Fiscal bill’s first estimates have added 1% to the deficit for the Lost $10 bln in disinvestment, extra $15 bln in subsidies ( apart from the $10 bln being charged to ONGC’s account) and the $15 bln in government borrowing ($10 was approved last month and another such will be expectd by the market till January is crossed) There is also a hint of lower direct tax collections as artificial balllooning in Advance tax will burst by Q3 but the Economy is performing much better than expected, esp considering the growth in credit to retail and NBFCs and that may just not happen on the low taxpayer base and the average Corporate tax in the country ( still a high 23%)  

Gas shortages and power loans going bad worth 10% of 10bln(ET! again), coupled with recapitalization of SBI and PSU banks will wait till FY2013 and skew our bill then with disinvestment not likely till FY2014.

The festive rush can be seen in the closely bunched analysis and prediction up here as well as I have to rush for that German cake being spread all around..Manufacturing inflation has been down and the stiff discounts are easy on the budget  (If only this were a source of income) 

In  the meantime NHB has abolished prepayment penalties, though this may not affect banking portfolios where refi from NHB is not sought but specialist HFCs were already charging much higher or losing the loan to competition (to 4%) Without prepayments and with active conversions of largish 100 year tenures on floating loans increasing thru the two years, there is a lot of work in bank ops offices too even as Mortgage cos like LIC and HDFC correct on the makeover effected in truly snail fashion here ahead of the festivities




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