Budget 2018: A health drink for insurance but banks left thirsty

The knock-on effects of the boost to rural production and consumption augur well for banks’ loan growth. Graphic: Subrata Jana/Mint

EXPECTATIONS: HIGH

DELIVERY: LOW

Measures:

—A flagship National Health Protection Scheme to provide coverage to 100 million poor and vulnerable families translating to 500 million beneficiaries .

—The coverage would be up to Rs5 lakh per family every year for secondary and tertiary care hospitalization.

—Scheme to tackle bad loan problem among MSME (micro, small and medium enterprise) borrowers proposed but no details given.

—Banks and companies to participate in Trade Electronic Receivable Discounting System.

—Refinance rules for non-banking financial companies under MUDRA scheme to be revised.

Impact:

—Perhaps the only splash in the Union budget for the financial services industry was the flagship health insurance plan. Much like the crop insurance boost in the previous year, the health insurance scheme can fire up penetration of insurance. Stocks of general insurers surged in anticipation of the boost to their business.

—The big expected announcement which didn’t come was the increase in foreign holding limit in private sector lenders from the present 74%. Stocks of private sector banks had run up sharply. The budget reiterated its commitment to bank recapitalization but was mum on any more reforms.

Stocks in focus:

—Shares of general insurance companies rose with ICICI Lombard General Insurance Co. Ltd surging over 5%, the New India Assurance Co. Ltd rising 5.45% and even life insurers gaining on the hope of greater insurance penetration. In the absence of any big announcements, bank shares lagged with the BSE Bankex closing in the red.

—The knock-on effects of the boost to rural production and consumption augur well for banks’ loan growth.

—Affordable housing in rural areas would also add to retail loan growth of both banks and non-banking financial companies.