By Abhinav Bansal and Deep Mukherjee Government package of Rs 3 lakh crore of credit guaranteed directed at MSME will provide support to the MSMEs. The segment, among the worst impacted in Covid-19 lockdown, is critical for getting the economy back on its feet. The government package is likely to have a multiplier effect on SME credit demand and supply. It is estimated that applications for credit limit enhancement and fresh loans can shoot up by four to five times the normal volumes. It is also expected that despite the credit guarantee the banks will not let go of their credit standards, since a credit guarantee scheme is clearly not a helicopter money. As such CGTMSE requires that the lenders perform their usual underwriting due-diligence and portfolio monitoring even for guaranteed loans, so as not restrict moral hazard. As such the current government dispensation will be for loans disbursed till October 2020.In short, an enhanced underwriting capacity is required to perform … [Read more...] about Government’s Rs 3 lakh crore MSME package best disbursed via digital MSME underwriting
Indirect method of cash flow statement
The market does not know what is the true underlying quality of the book on which it is paying a multiple, says Neelkanth Mishra, India Equity Strategist. What is your understanding of the way the shape of the Indian economy is moving? The optimists would say it is a V-shape recovery, a pessimistic would say that it is difficult to predict. What is the right way of looking at the new normal for India? The situation we are in right now, we need to assume that the virus is still not under control. We are still seeing a doubling rate of cases and in many of the large cities, the medical infrastructure is starting to get overwhelmed. The government has now realised the challenges of enforcing a lockdown because in Mumbai, a lot of the police personnel are infected and several have unfortunately died. The ability to enforce a lockdown is also limited and therefore, the state is receding. The government is now realising that they need to rope in civil society. So societal structures are … [Read more...] about Credit Suisse on why financials are the worst performing stocks globally
BSE also plans to provide e-KYC services to stock brokers and the other approved intermediaries in the near future for which it will issue application programming interfaces (APIs) for stock brokers and other intermediaries to connect their IT systems to BSE’s e-KYC system. … [Read more...] about BSE launches e-KYC services on StAR MF platform
Different lenders have approached different strategies around offering the term loan moratorium to their customers.At the crux of it the message is that there’s no free lunch, what borrowers are getting are just an additional time to manage the cashflow disruption as the interest gets accrued, and the loan tenor increases without impacting the credit score of the customer.Lenders feel it’s important for borrowers to understand it’s not a waiver and it comes at a cost.Ravi Subramanian, MD & CEO, Shriram HFC said in an earlier interaction, “Moratorium messes up with fiscal discipline of individual because if you’ve not paid for three months you get used to not paying that EMI and to me the cost of that is very very high because then it leads to increased NPAs, collection efforts, increased costs for lenders and that’s negative”He thinks a better mechanism of forbearance on provisioning could’ve helped instead of the moratorium which … [Read more...] about EMI Moratorium: Impact on fiscal discipline of borrowers?
We have built a very good credit culture at the consumer level, we should see that we do not vitiate that, says Sanjiv Bajaj, CMD, Bajaj Finserv in an interview with Nikunj Dalmia. Everybody is using words like unprecedented, new normal, panic, crisis. What is your understanding of the environment?The way I see it, this pandemic has put the entire economy in coma because both the demand side and the supply side have stopped working. The lockdown was required initially because of the extent the virus hit us and many other countries around the world. In the last two months, people have become fearful and have lost some confidence about the future. A lot of it is because we are living in a world of uncertainty which is feeding the fear. None of us have experienced a situation like this in our lives. On the other hand, we know the challenges with the migrant workers, we know that daily wage earners are not necessarily getting paid, but the average salaried class has got paid for the … [Read more...] about 6-month moratorium unnecessary, it can alter credit behaviour of customers: Sanjiv Bajaj