For the non-bank financial sector as a whole to turn around, the government needs to put aside fiscal discipline for around two years and jump-start the economy, said Bajaj.
“We need the tailwind from the government to rebuild the sector.” Sanjiv Bajaj, MD, Bajaj Finserv
India’s non-bank lenders have been reeling since the latter half of 2018, when IL&FS Ltd. group companies defaulted on debt and triggered an industry-wide credit squeeze, raising borrowing costs for small lenders. The government and the RBI stepped in to support by assuring increased liquidity and a provision for a partial guarantee to help these firms sell loans.
Bajaj said midsize players which aren’t perceived as being “pristine” have had trouble raising funds, especially from banks. “The only answer is either economy to pick up or more equity to come in or the liquidity problem will become a solvency problem in their case.”
“If the government help doesn’t come, we’ll see some deterioration or stagnation,” said Bajaj.
The big question for India watchers in the aftermath of the IMF downgrading growth yesterday is how long it will take for measures taken in the third and fourth quarters of last year to transmit into economic growth.Click HERE to subscribe to Fuller Treacy Money Back to top