Banks: Credit up another 31,500 Cr (INR 315 bln)

The fortnight ended December 16 data shows expansion in credit continues at much the same pace reaching INR 4.26 Tln or $82bln approx. having started a w-o-w uptrend since the last week of October. Deposits though shrunk by INR 365 bln, a large sum, even as Advance Tax payments for Ecember were due. Rates of Savings and NRE deposits have been increased over this last week of the year with ICICI, IDBI joining ranks at a 9.25% NRE rate

Will we lose the infrastructure push in the High interest rate world order?

Unlikely..the winning core team of the India Infrastructure story is resilient and used to challenges

Though Indian operators do not have the habituated brand of global infrastructure giants and are getting preference from the government in financing as they have to use the $3 trillion infrastructure cheque to build India’s ports, power plants and many more, we seem to be enjoying their discomfort taking the entire brigade as equal to constructionc ompanies and worse treating them like defaulters from mid cap space even when they include institutions like REC, PFC, PTC and above all IDFC

While one can understand General Kamath’s discomfort with the high interest rate regime he stewarded in the 90s , a t that time apart from not having a retail mortgage book we also did not have a tiered strcutre of investors playing cash trades and funding the india story so willingly. Corporate Finance at sub 20% rates may not be repeated in this generation by high interest rates let alone create a sad layer of former infrastructure projects in a BIFR like bundle for happy punting and 89 meter maximums for the sporting traders in the global carry trade economy.

Why it will not happen is also because institutional portfolios like that of IDFC are of much better underwriting strengths than Kamath’s ICICI which stil has all the processes in place. However in roads we do have operators without much history and thus much less of a future. those who doubted GMR and GVK are already licking their chops and there remaining leveraged units has not created extra default situations.

In the absence of a larger superset of Billion dollar networth Infra businesses it is probably been more of a handicap for which IDFC and REC have been needed yet Also Delhi metro and others have proven we have the quality of project management required to build the processes within this consistent superstructure for Infrastructure Finance which will continue to stretch banks that want a piece of the lucre fronm the sector and keeps gravitating to construction plays in its corp credit book.

The planned network of the Delhi metro upto ph...
Image via Wikipedia

Delhi metro, operated by the Delhi Metro Rail ...
Image via Wikipedia

Rejuvenating Banking after the crash of ’08

I wonder how any bank with a brand like Yes or Kotak can today crack open the expat market which has a few relatively unknown niche players ( Geojit, recently acquired by HSBC) It would need key leadership experience to realise a valid entry point. One option however, at the barest minimum requirement, is to go for a PSB or a local bank in UK and Australia or the Middle east. That requires capital but any other option leaves you with a performance like ICICI Bank which has managed only rep offices in all its overseas expansion and have not been able to generate the required trust without a retail presence on the ground, leaving the field seemingly open for players like ING and HSBC. They do have some presence now in London.
 
Regulatory level liaison with developed markets would sadly continue to maintain the respectable disconnect that exists as emerging markets can barely acknowledge their requirements of the day as they are seamlessly extended to the rest of the world. It remains to be seen if that home brewn recipe of the Basel and BoE would ever land in some drifting current and be taken care of. A way must be found for India to spare the cash and show their value in the developed world and invest in these international markets before much more will come out to bear on market shares of all the players. This is not to belittle current efforts from either side but I didn’t see it on the agenda in these last few years at work. It is never too late to start?
 
All the PSB scrips remains a good buy in Indian exchanges and I look forward to even more QIP issuance from YES Bank. But sooner than later the investing denizens will realize our SME status in the global market and unlike China, here Private Enterprise is free to make its own market rules, which is not something we have made good use of till now.
 
The other priority and now a key priority is of course our spreading into the hinterland as we strengthen distribution and support the microcredit revolution and the farmers. This spread would require immediate action by the banks as the government has al but given the keys to the treasury for the banks to lend and spend and while Corporate credit may be lukewarm, the hinterland beckons.
 
Last but not the least, the banks are key to the Indian consumer treasure now that it is all about lifestyle and disposable spending. While unsecured credit would not be remunerative, as we cannot go beyond the current systemized and sometimes too painfully detailed back office ops required to support the credit.
 
As a banker I probably wonder why the boom did not last, but then nothing lasts forever and as far as emerging markets are concerned , it remains a s good as it gets as Class B towns and Metros keep growing incessantly and people continue to spend on retail, lifestyle and entertainment. Infrastructure financing will attract the big bucks and the retail lifestyle spending will grow as fast as ever within the next 12 months, the magic being in access and prompt delivery by the banks.
 
Predictions: Interest rates are headed lower and Treasuries are going to be fatter and richer but still incomparable to the riches in the global markets
 
[Category India]
[Tags India infrastructure, Banking, Bank stocks, Wealth, Retail Lifestyle, Amitonomics, Lifestyle Economy, India, Economy, Finance]
 
Amit Mittal
mittalster@gmail.com
 
Amit Mittal
Mob: 919972442877
amit.mittal@me.com
MD, Advantage Research Pvt Ltd
@Innovative Film City, Bidadi 562109
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Insurance Tweets (India) :: Midweek Dropzone

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