India's GDP growth is probably at the “trough” and the pace of economic expansion will start rising by January 2020, HDFC Bank Ltd.'s Managing Director Aditya Puri has said.
And while the NBFC crisis is over, there may be a few companies, especially those with exposure to the real estate sector, that may face problems in the future, Puri told the Press Trust of India in an interview.
"I am not saying boisterous…or we are going to have a runaway boom. I am saying that as we are moving ahead, growth will move higher from where it is. We are probably at the trough,” Puri said.
Higher government spending, investments in infrastructure, a good monsoon, and Finance Minister Nirmala Sitharaman's moves to put more money into the economy will support the growth, he said.
But given the very large size of India, the measures will take time to yield results, the HDFC Bank MD said, adding that by January, he expects a pick-up in GDP growth.
On fiscal-side worries that have arisen due to the Aug. 20 corporate tax cuts, Puri said while it is “reasonable” to expect a widening of the fiscal deficit, he is confident that the same can be bridged through higher disinvestments, and better collections of both goods and services tax and the income tax.
On Banking Sector
According to Puri, banks at present are witnessing demand for working capital loans, but capacity utilisation needs to move up to 80 percent from 77 percent currently for investments to happen. This, however, will take some more time to happen.
The HDFC Bank MD believes the NBFC crisis is over, but said there is no easy solution and things will take time to settle down.
There may be a few more entities, especially those with exposure to the real estate sector, that will face difficulties. Altico Capital, an NBFC focused on the sector, is the latest in a strong of shadow banks that have defaulted on repayments.
“The crisis is over, the problem is not over. There will be a few like these... I don't think there are any unrecognised large NBFCs which will move into a problem,” he said.
Stressing that an NBFC going down does not create systemic risks because they are not a part of the clearing system, he welcomed efforts like portfolio sell-offs, bringing equity and improvements in cashflows.
The Reserve Bank of India has also taken measures to help the NBFC sector and the public sector banks have also started lending, Puri said. “We need to keep monitoring the sector in the future.”
On HDFC Bank
HDFC Bank, which has an enviably clean loan book, is very well-capitalised and will not be needing capital for at least three more years, Puri said.
“We are seeing growth in demand,” he said.
India's largest private sector bank has started lending to newer segments, like the small businesses, and even shopkeepers because of technology tools. It has started to go beyond the top 4 million consumers and is now targeting the top 6.5 million, courtesy the data it has and targeted marketing efforts, he said.
The quality of its unsecured book is also “quite safe” and the bank expects this stream to continue growing. On the term loans side, Puri said the bank has participated in road and renewable energy projects, and stressed the need to have “good projects” for this to grow.
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