Rise in Credit Demand – Credit demand is slowly improving, driven by higher sanctions in infrastructure, along with mortgage and auto loans. Expectations are for ~15-16% credit growth for FY10 and ~20% in FY11. Increased credit offtake should not impact lending rates.
Margins – Margins for most banks have improved over last 2 qtrs and managements see mixed progress, going forward. Public sector banks see improvement through better LDRs, despite the CRR hike.
Asset Quality of Banks – Banks have seen lower delinquencies in the
last qtr and asset quality pressures now seem to be isolated to a few
sectors like jewelery and textiles. [Study individual banks, before investment decision]
Insurance – Listing of subsidiaries could selectively start in the next 12 months, but regulatory hurdles remain.
Risks – They are mainly external which are either regulatory (higher provisions, cap on margins) or government finance dependent (higher deficit leading to spike in rates).