Speaking of challenges, the first and foremost is the export decline, which entered into 10th straight quarter in Q1-FY17. The comfort provided by remittances, in terms of covering the trade deficit, has also weakened lately.
Lending behaviour developments are generating risks for households and financial institutions. Banks, however, do not yet take sufficient account of the systemic risk inherent in the housing market. They are vulnerable to the impact that a price correction on the housing market would have on economic activity, and thus on the quality of their loan portfolios.