India Credit growth drives bank earnings

Foreign funds chasing the domestic growth story in the world’s second-fastest-growing major economy have tended to play the theme of banks over the past few months as a proxy to local consumption.

After all, everything from corporate borrowing to buying a car to taking out an agricultural loan to purchase seeds for the next sowing season has much to do with bank lending.

Consequently, bank stocks over the past six months have outperformed the benchmarks, lagging only the capital-goods sector, which is in the middle of a drive to fix the nation’s creaky infrastructure. And even there, for funds to, say, build a road or a power plant, debt is the preferred option to raise most of the capital.

India’s largest two banks by assets, State Bank of India and ICICI Bank