“We have gone through two phases of concession being given to the borrowers with the moratoriums, now we are in the so called restructuring phase.
“The numbers are trending in the right direction, that means the customers do realise that they do need to pay. Many customers who have taken moratorium or who were worried about this situation have actually started paying and I am expecting a similar trend on restructuring side as well,” Chaudhry said.
“RBI and the government are trying their level best with all the limited resources they have. They are moving in right direction, they are quite pro-active but it is severe and a very big crisis. So let’s see, time will tell what will happen,” Chaudhry said.
Speaking at the event, Bandhan Bank MD and CEO Chandra Shekhar Ghosh said the rural and semi-urban segments present huge opportunities for the banking industry. However, lenders will have to tweak their banking models for these areas.
“Crisis always gives an opportunity to the banking industry. If you see 1991, we have seen that there was an economic growth after that. The economic growth was also high after the 2008 Lehman Brothers crisis. I hope this is also the right time to take on the opportunity,” Ghosh said.
“In rural India there is consumer demand, they are showing demand, that means they have the money,” he added.
However, hiring management and technology people to do banking in such areas will not work as compared to hiring the local and simple graduates, he said.
“One thing to keep in mind is that lending to these poor people is not a charitable job,” he asserted.
Talking about reforms in the financial sector, Chaudhry said the functioning of public sector banks has not changed even after consolidation or reduction in government holding, and they still have to carry the government agenda.
“The final solution is that the government should not own banks. To really reform the financial sector, go the whole hog,” he said.
He also said the government may not offer another stimulus package and the banks have to solve their problems themselves.
The banks that have not raised capital or that cannot get refinance from other banks will struggle, he cautioned.
Axis Bank has been able to raise Rs 10,000 crore even during these times, he said, adding the lender has approval to raise another Rs 5,000 crore.
Ghosh said banking has become challenging because the depositors say the interest rates are low while borrowers feel rates are high, and now courts too have intervened in the pricing of outstanding loans.
“There is a need to balance the interests of depositors, lenders and borrowers,” he said.
However, he remained hopeful that demand will revive with the festive season.
Hemant Kanoria, chairman of Srei Infrastructure Finance Limited, said before reforming the financial sector, the real estate industry needs to be reformed. “Do not put the cart before the horse,” he added.
“Financial reforms without real estate sector reforms will lead to further NPAs,” he said, adding the liquidity of NBFCs will not improve unless infrastructure companies and MSMEs make money.
He also said interest rate cuts will have no impact on credit offtake because the borrowers who need more money will not get it at low rates, especially when they do not have the cashflow to pay back.
Chaudhry lauded the RBI for imposing additional provisioning on banks for restructuring loans. However, he expressed reservations on inclusion of startups in the priority sector lending category.
Not all banks want to lend to startups as they do not want to lose the principal amount, he remarked.