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Summary of Contents
SHAREKHAN
SPECIAL
Q4FY2007
Banking earnings preview
We expect the interest
income on advances in the last quarter to show a strong growth on the back
of above 28% year-on-year (y-o-y) credit growth and the full impact of the
hike in the prime lending rates (PLRs) effected by the banks in the fag end
of December 2006 or early January as well as in mid-February 2007.
However, the cost of funds may have an upward bias, thereby putting some
pressure on the margins of the banks with lower current and savings deposit
account (CASA) balances as the deposit costs, especially the bulk deposit
rates, have moved up sharply. However, the one-time cash reserve ratio
(CRR) income that banks are expected to get in this quarter with retrospective
effect should help them to tide over the increased deposit costs.
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