Next year, India is expected to grow 8-9-10% from the low base of this year. The challenge will be to ensure that growth at the same pace continues in the following year and the year after. Hopefully the Budget will address this, says Sanjiv Bajaj, CMD, Bajaj Finserv. Going into Budget 2021, there has been a lot of headlines around the financial services sector. Let’s focus on two policy moves that could be seeing light of the day -- a bad bank and reducing the arbitrage between NBFCs and banks. Given the low base of growth this year -- negative growth in fact -- the worry is not about next year. The worry is what happens thereafter and this is the time for the Budget and for the rest of us to prepare ourselves for the future to get consistent growth back over the next three years, More importantly, we have to become atmanirbhar (self-reliant) and go forth with Make in India to become the manufacturing gateway to the world after China. In order to do all this, a robust financial services sector is needed and we must attract all the foreign capital that we can get within a set of sensible guidelines. But we must also create a strong domestic financial services industry because that is going to be with us for the rest of our lives. Keeping that in mind, today 70% of banking is with public sector banks which are saddled with bad debt. That has to be taken out of the system and that is where a bad bank or multiple bad banks come into play. But that is not enough. After that, the PSU banks must be professionalised. Other than a few key strategic PSBs, the government must divest their majority stake in the rest to professionalise them and prevent the need for a bad bank decades down the line. As far as the NBFCs are concerned, new supervision guidelines have come. This is not about arbitrage. There will always be arbitrage in different models and arbitrage by itself is not a bad word. What was important was large NBFCs get regulated and that is where RBI has come out with a set of tighter supervision and regulation for the large NBFCs which makes a lot of sense. It is something that must be done. I will leave with a last point on this issue which is that just rules do not make a difference; otherwise no bank should fail. Why are banks failing? It is equally important that the management of those banks and NBFCs have to be of good quality. It is equally important that the regulator needs to see that after making rules, there is proper supervision and monitoring as well. CII has time and again also talked about the need for multiple bad banks and how alternative investment funds AIFs could buy bad loans. Is this the right time?It is absolutely timely for this to be done. If you have a very large problem, then very often the solution is not clear but if you break the problem up into smaller pieces, then you can apply individual solutions for each piece and that is where CIIs recommendation of multiple bad banks comes about. These are not banks really. These are asset books of different industries. It could be different levels of stress. It could be different geographies. This is something that would need to be broken up intelligently so that each of these little books become attractive to buyers. If you open it up to Alternative Investment Funds, you open it up to foreign capital. There is expertise in the developed world on how to manage these kinds of assets efficiently and take them to resolution. We might as well benefit from those while creating a space with some additional capitalisation of the existing banks to go about extending credit which is very much required if we have to get economic growth back to 7-8% and even 10% and more in the coming years. We have been reading all these reports of how real estate has started making a comeback. Is it cyclical, is it pent up demand?If you see what is happening to housing demand in Maharashtra, as the state government went ahead and cut stamp duty and extended that from December to March, it has created an impetus for additional purchases because a lot of the middle class and upper middle class people have saved money. They just need the confidence that tomorrow is going to be better than yesterday and they will go out and buy and it is this confidence that the government needs to reinforce in this Budget. Infrastructure across various sectors has a huge multiplier effect and that will give benefit for multiple years and it must be a strong focus. In addition to that, we need things to be done on health, education. The government must also continue with some of the measures of the past year like providing food to the really poor and providing liquidity support to MSMEs. MSMEs have stayed afloat because of the strong action that the government and RBI took last year but they are only staying afloat so far; we have to get them back to growth and they need the continued liquidity support. There are certain sectors which are still hurting. If those can get clinical interventions from the government, it would collectively help us grow next year. The challenge is not next year as we will grow 8-9-10% from the low base of this year. How do we ensure growth at that pace in the following year and the year after will hopefully be addressed by the Budget.
from Economic Times https://ift.tt/39n4jQO
No comments:
Post a Comment