Budget 2015: Top three measures that will boost non-banking & finance stocks

Source: Economic Times

Putting emphasis on banking and finance sectors, Arun Jaitley in his Budget 2015-16 talked on the need for more clarity in these two sectore. The budget also highlighted that additional fiscal space will go to funding infrastructure investment.

1) Measure: Setting up of Micro Units Development Refinance Agency or Mudra Bank with a corpus of 20,000 crore. MUDRA Bank will be responsible for refinancing all Micro-finance Institutions which are in the business of lending to such small entities of business through a Pradhan Mantri Mudra Yojana

Impact:

The new bank will refinance loans of microfinance companies at a lower rate. This will result in a lower rate for MSME borrowers and hence increase in credit demand. One of the major beneficiaries of this measure will be SKS Microfinance.

2) Measure: NBFCs registered with RBI and having asset size of `500 crore and above may be considered for notifications as ‘Financial Institution’ in terms of the SARFAESI Act, 2002.

Impact:

The Act allows a lender to recover non-performing assets without court’s intervention. With the inclusion of NBFCs under the act, these institutions will now be able to better manage their loan assets.

Stocks to benefit: Companies such as Bajaj Finance, Srei Infrastructure Finance and L&T Finance holdings will be the major beneficiaries of this measure.

3) Measure: Total Investment in infrastructure go up by nearly 70,000 crore

Impact:

Credit demand over the last few weeks has been subdued due to lower economic growth and infrastructure spending. With substantial increase in infrastructure spending, credit demand may pick up in the coming quarters.

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