In next 60 days, a lot of funds will be available for NBFCs: Rajesh Sharma, Capri Global
We grow about 30% year on year and we are on our stated path of growth, says Capri Global MD.
What is your assessment of things on ground both in terms of demand scenario and credit growth at the bottom of the pyramid?
The demand side of the loan is intact. Since last September, when IL&FS defaulted, what has affected and impacted is the availability of money by banking system to NBFCs and HFCs and that has created a slowdown in fresh disbursements. But now things are coming back to normalcy. I clearly see there is a change in the lenders, their confidence is building up. It has been four quarters from last September and they are not seeing much deterioration in the asset quality, which was a worry.
Besides, the government has taken a lot of measures in terms of giving bank loans to all NBFCs up to Rs 20 lakh as a priority sector and that is going to give a big boost to banks to give them loans. Plus, the government has also announced in the Budget, the partial guaranteed pool purchase by the banks. Some operative guidelines were expected which have come and some clarifications have been given.
We clearly see those transactions in the partial guaranteed pool scheme to start happening. Put things together, availability of money will not be a problem, In the next 60 days, a lot of funding will be made available to NBFCs, which are focussing on the retail lending side.
What is going to be your focus areas? Will MSMEs continue to dictate your product mix?
As I said, the demand side of the loan is intact. We are focussed to lend to those customers who do not get funding from the banking system and there is a huge market. As per SIDBI and CRISIL, there are almost 51 million such units which do not have access to credit. At Capri, we are going to serve these customers and this year also, we grow about 30% year on year and we are on our stated path of growth.
While MSMEs have the highest share in the AUM mix, there is a lot of asset quality stress over there. What is the outlook?
In the first quarter, little flare ups happen but we feel that on a yearly basis, our asset quality will remain about 2% which is what we have projected.
How has the liquidity system improved? Many of the government’s recent measures have started to kick in. Have they started to yield the desired result?
Government measures have started kicking in during the last three weeks. After the company applies, the loan application passes through the sanctioning system, money disbursal and then in turn NBFCs start lending. It will be a cycle of about 10 weeks. We clearly see a difference on the ground from the middle of November. We will see their level of disbursements coming back to normal levels. Many companies have partially or fully stopped. I think they will come back to the business and December onwards, we will see a momentum building up on the lending side by NBFCs and HFCs.
What about the funding environment? Even though banks have started passing on the rate cuts, across the board, some kind of lag continues to persist. How are things shaping up on that end?
If you talk about the financial services sector including NBFCs and HFCs, every player is focussing on getting the funds. There is not much focus on the interest rate. Interest rate had not come down for this sector yet.
What is the outlook on the funding cost at the margin?
Funding cost continues to be the same. It has not come down compared to G-secs. No pro-rata reduction has happened there. May be, next quarter we may see some slight reduction there.
What about the borrowing mix shaping in the next one to two years? Is a diversified borrowing mix better than a complete reliance on bank borrowings?
Given the environment and the concern of lenders and shareholders, the long- term borrowing will make much more sense and that can be done by the banking system. In any case, mutual funds have not started lending to NBFCs and HFCs except for a few names.
But banks would also be restarting the credit in the economy, mainly the PSU banks. Would that not compete with NBFCs?
There is a clear demarcation about what banks are doing. The NBFC business model can only be successful when they are doing something which banks are not doing. I see banks will continuing to lend in the formal segment and NBFC will continue to lend in the segment where banks are not doing.
It has been a year of the IL&FS crisis. What has been the biggest learning, are we out of the woods yet?
The NBFCs and HFCs have started focussing on building long-term asset liability,. They are not depending on borrowing short term or lending long term. Clearly, all the ALCO committees appointed by the board are focussing more on each company to see that their asset liability mismatch does not happen.
Long-term, it is the asset quality which is going to determine their future. So, everybody is becoming more conservative in terms of collection, lending and margin of safety.