Budget 2020

Financial services sector optimistic about turnaround

Our Bureau Mumbai | Updated on January 24, 2020 Published on January 24, 2020

(from left) Surabhi, Deputy Editor, BusinessLine, along with B Raj Kumar, Deputy Chief Executive, Indian Banking Association; RK Jha, Chief Marketing Officer, LIC Mutual Fund; Gopal Singh Gusain, Executive Director, Union Bank of India; Umesh Revankar, MD & CEO, Shriram Transport Finance Company Ltd; and R Baskar Babu, Co-Founder & CEO, Suryoday Small Finance Bank, at a panel discussion   -  PAUL NORONHA

Bets on more measures in the Budget to give growth a leg up

The banking sector may have the worst behind it, with experts in the sector also expressing optimism about a turnaround going forward – possibly towards the second half of the year.

Speaking at a panel discussion on ‘Tackling the Twin Balance Sheet Crisis’, moderated by Surabhi, Deputy Editor, BusinessLine, industry experts also laid out their expectations from the annual exercise that would help boost growth and revive demand in the economy.

B Raj Kumar, Deputy Chief Executive, Indian Banking Association (IBA), said given that around 30,000 tonnes of gold are available in the country, priority sector lending can be granted for gold loans where the loan amount is less than ₹50,000. Currently, less than one per cent of gold loans are taken, he pointed out.

“Today, our priority is how to boost the economy...So this can be used as a tool ... There is a lot of immense potential in this. An average Indian will be having 10 gram of gold. So, we can motivate everybody to take loans ...because gold loans for agricultural purposes is given a priority tag, but even for consumption also, it can be considered,” he explained, adding that this is his personal opinion, and not that of the IBA.

R Baskar Babu, Co-founder and CEO, Suryoday Small Finance Bank, said that it would be pertinent to have a holistic financial inclusion policy which is all-encompassing. A consolidated financial policy will help ensure that people do not continue to remain financially excluded,he said.

Rising NPAs

Talking about the mounting non-performing assets that banks have been grappling with, Gopal Singh Gusain, Executive Director, Union Bank, said that when it comes to bad loans in the corporate segment, a degree of bottoming out has been perceptible. But, this is not true for NPAs in the micro, small and medium enterprises (MSME) and retail segments. Furthermore, he pointed out that banks will never stop lending, and that it is just the methodology of lending, portfolio and the strategy that will change.

As for the crisis brewing in the mutual fund investment in debt market, RK Jha, GM (AMC) and Chief Marketing Officer, LIC Mutual Fund, said the crisis has not abated. He cautioned that it is “extremely important” for investors to go through their portfolios “very minutely”. He identified credit funds as the root problem for whatever has happened.

For investors with a high risk appetite, instead of opting for credit funds, which can be an area of distress at a later point, hybrid schemes can be explored, said Jha.

Rural economy

Meanwhile, Umesh Revankar, Managing Director and CEO, Shriram Transport Finance Company, said that green shoots are already visible in the rural economy, which he attributed to good, widespread rains, as well as the rural crop, groundwater and storage water being good.

“I think the rural consumption demand will continue to be good at least for another six months. Thereafter, if there is a reasonably good monsoon, and maybe (if) the FMCG demand and the consumer durable demand comes back, I think by the second half of 2020, we should see the faster growth rate. So tentatively, (around) October or November 2020, the overall economy should start growing well. As far as rural is concerned, already green shoots are available,” said Revankar.

Union Bank’s Singh also affirmed that green shots are visible in the industry, while adding that it may not be so widespread currently. By the second half of 2020-21, the economy should be back on track, he said.

Published on January 24, 2020
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