Category: Banking & Finance

What are the pain points for Bajaj Finserv?
It is actually a combination of things, but at the heart of it is a continued nervousness on the pandemic. To be fair, the second wave got us all by surprise. It was a devastating wave both for lives and livelihoods. What it also does is through all the lockdowns that we saw, with more localised lockdowns compared to the first wave, it starts disrupting the supply chain again. And each time you restart it, it takes that much longer.

If you look at small businesses, through the first wave many of them shutdown. They somehow managed to put some savings to get started, they have to again shutdown in the second wave. So, that is where there is this nervousness about the third wave and that is why I think government and private sector are pushing people to get vaccinated. We are helping them do that. We are still propagating all the safety-related measures that we need to take so that we have a milder third wave, if at all it comes.

As a result of that, lives get protected and we stay open for business. For example, I am seeing on the consumer side, demand in July already started picking up early August; first 10 days of August. It is looking good. If this trend continues in the next few months, we could do very well for many sectors to be very close to pre-COVID levels. But if we get hit by a third wave again, the whole thing goes down and that is where part of the nervousness comes.

Would you say therefore the financials, the banks, the NBFCs are more nervous?
Again, this differs from case to case. Last year, in the first wave itself, a number of private banks, NBFCs went and raise outside capital and they flushed out possible NPAs early on. You could see that in their P&Ls and they are rearing to go now. You are starting to see some of them do that.

On the other hand, there were those that were slow at raising capital and then it became too late to raise capital. They have not yet flushed their NPAs out and as a result of that they will be slower to pick up. So, it is going to be a bit of a mixed bag. Overall, given that the pace of growth is also not suddenly going to accelerate to a level where capital is not available, I do not think capital will be an issue in supporting demand and growth.

How did you read the statement from the Prime Minister saying that India is one of the most competitive when it comes to tax? Are you reading that as a sign that it is going to stay as status quo next year as well?
I definitely hope it does and this goes towards a much larger foundation that the Prime Minister and the government is talking about which is just improving ease of doing business. So, it is not just taxation when he talked about how in the Companies Act the number of laws is going to be criminalised, he talked about the repeal on the Retrospective Tax Amendment. He talked about opening up a whole bunch of strategic sectors which were earlier only for the public sector, whether it was defence.

What he is trying to say is that we are creating all the elements to take India into that next big exponential growth jump and I hope that you as the private sector will leverage that opportunity and have confidence in that growth. A lot of the proof is in the pudding. I think it is equally important to say the LIC IPO should happen on time.

The privatisation on the public sector, couple of the banks, the insurance companies should happen. This will then create the traditional confidence. It is not a question of saying that I have done three things or you do three things, it is a question of how we as a private sector keep working with the government, keep pushing them to do more and they do the same with us. That is how this country will grow.

One big difference that was there between wave one and wave two was inflation. How do you see that hitting the economy at this juncture?
If you look at not just India, but at all the world governments, central banks have to make choices. Those choices are made in a volatile environment because of the pandemic. So, when you look at inflation today, other than that from something like oil, the rest of it could very well be because of supply chain disturbances that have happened. As we are hearing, central banks from all over the world say that those could be transient.

A much more important focus is on growth with every country saying we need to grow ourselves out of it and you have to make some choices. If you grow with investments going into the right areas, then that becomes productive growth. Two, that should bring inflation down. Three, if the pandemic comes in good control going forward and supply chains go back to their more efficient ways, then the transient impact also should go away. That is what we can hope for.

So, it is not as big an issue as we thought a couple of months ago?
I do not think it is a big issue at all. If you read what some of the well-known economists even talk about, it is almost an expected outcome of the current monetary policy. It should not be surprising that in a situation of a accommodative monetary policy with disturbances in the economy due to the pandemic, this is almost an expected outcome. Why should we be worried about it as long as we are keeping our eye on it, as long as we are seeing growth coming back.