Veteran banker KV Kamath is of the view the government might quickly come up with more measures to assist these sections of the economy that have been worst hit, which includes the micro, tiny and medium enterprises (MSME) sector.
In an interview with FE, Kamath stated there is systemic discomfort, adding that some handholding is necessary. “If we have localised the problem to MSME, the government can address the problem in Q4 as it did in Q1,” Kamath stated.
While the financial recovery in the September quarter might have come as a “pleasant surprise”, there’s nevertheless some discomfort in the technique, he stated. However, he believes the improvement is actual and right here to remain. “Improvement in Q2 is real so most people have come out of it. What probably happened is that production efficiencies contributed to Ebitda improvement. And productivity gains are here to stay,” he stated. He also attributed the reasonably smaller sized quantity of applications for loan recasts to the deleveraging that has occurred in the final handful of years.
Kamath stated: “When we looked at the top 26 sectors in the banking system and large corporates, the extent of deleveraging was unprecedented. Almost all recap was done and banks were in a state of good health with clean balance-sheets.”
Citing information given that 2000, he pointed out the debt-to-equity ratio of corporates which was then was 4:1 and had come down to 1.8:1 by 2009. “This time if you see 50% of the Sensex companies have hardly any debt. For the remaining, debt to equity ratio is 0.5:1,” Kamath stated.
Kamath led a committee appointed by the Reserve Bank of India (RBI) which identified 26 sectors that would be eligible for loan restructuring. Tough boundaries have been set for these sectors and as the deadline of December 31 nears for the recast window to shut, the percentage of borrowers searching for recast is anticipated to be considerably reduce than earlier estimates of analysts and rating agencies.