India at the threshold of opportunity

Thu Jun 05 2014, 10:44 hrs
The next decade presents a major growth opportunity for India and with the right policies in place, there is the scope for significant returns for investors.
One of the sectors that would be a beneficiary of this growth is the financial sector, according to a report by Morgan Stanley.
The next decade presents a major growth opportunity for India and with the right policies in place, there is the scope for significant returns for investors. One of the sectors that would be a beneficiary of this growth is the financial sector, according to a report by Morgan Stanley.
Key findings:
* Financial system revenues to grow at a CAGR of 16.5% in the next five years to Rs 17.6 lakh crore for FY19 
* Profits to grow at a CAGR of 20% in the next five years to Rs 3.2 lakh crore for FY19
* Retail credit to rise to 17% of GDP by FY19
* Market cap of financial sector to be $450Ė$500 billion  in five years
* Private banks are expected to deliver CAGR in the range of 18-24% over the next five years, but PSU banks will do less well.
Key findings: * Financial system revenues to grow at a CAGR of 16.5% in the next five years to Rs 17.6 lakh crore for FY19
* Profits to grow at a CAGR of 20% in the next five years to Rs 3.2 lakh crore for FY19
* Retail credit to rise to 17% of GDP by FY19
* Market cap of financial sector to be $450Ė$500 billion in five years
* Private banks are expected to deliver CAGR in the range of 18-24% over the next five years, but PSU banks will do less well.
Challenges:
* Capital needed over the next five years is$65 billion, of which PSU banks would need $50 billion and private lenders $15 billion. The government needs to solve the capitalisation problems of PSU banks 
* Infrastructure lending in the past has led to non-performing assets, making banks risk-averse. Innovations in infrastructure lending are necessary to drive growth and overall lending activity.
* Much of the projected growth would be driven by SMEs who lack access to credit. With most loans turning NPAs, banks would need to find out ways to lend to this sector.
Challenges: * Capital needed over the next five years is$65 billion, of which PSU banks would need $50 billion and private lenders $15 billion. The government needs to solve the capitalisation problems of PSU banks
* Infrastructure lending in the past has led to non-performing assets, making banks risk-averse. Innovations in infrastructure lending are necessary to drive growth and overall lending activity.
* Much of the projected growth would be driven by SMEs who lack access to credit. With most loans turning NPAs, banks would need to find out ways to lend to this sector.
Share of Bigger Banks in Market Cap has been Increasing
Share of Bigger Banks in Market Cap has been Increasing
Reurn on equity trajectory for Indian banks
Reurn on equity trajectory for Indian banks
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