NBFCs cannot offer competition to banks because they have a very different model, said Rashesh Shah, chairman, Edelweiss Group. If NBFCs and banks come together in a collaborative model then there will be a powerful outcome, he said in an interview with Saikat Das. Edited excerpts:

Will this year be different for NBFCs from the previous year?
Consolidation will mark this calendar year. Last year you learned a lot. Now, it is time to utilise it.

But I think the old model of investing money is not going to be the game going forward. You have to be very efficient on capital, focused on partnering with banks. NBFCs cannot be competition to banks because they have a very different model. If NBFCs and banks come together in a collaborative model then there will be a powerful outcome.

What is the possibility of economic revival this year?
Overall economic outlook is optimistic. If you look at the GST collection of the last couple of months, it has shown a clear improvement.

Most of the high frequency data that we are looking at is also showing improvement. Interest rate cuts and the liquidity surplus will likely aid economic recovery this year. Investor mood, too, has also improved.

The government’s step of corporate tax cut was a big step. The government has also taken a lot of actions in the last three months to move things along. So, the green shoots are there, but the short term is bit of a hurdle.

India will grow well when four segments including two-wheeler, four-wheeler, home sales and FMCG start doing well again.

-Rashesh Shah

How will rising crude impact our economy?
If global crude oil goes above $80 per barrel, then it starts fuelling inflation in India. While we are waiting for another round of rate cuts by the RBI, if the oil prices go up , then the rate cuts may get delayed.

RBI did not cut rates because they were worried about the food prices. Oil has a little bit of uptake on inflation, and it will be a worry if the oil price goes up above $80 per barrel.

But, it is unlikely to happen.

Which is the proxy for economic revival?
Two-wheelers and FMCG will take the first leap in the rural area. Urban growth will be [seen in] auto (fourwheelers) and homes. They will be a proxy for growth. Home sales are doing well. Rural demand will be back in a year’s time.

India will grow well when four segments including two-wheeler, four-wheeler, home sales and FMCG start doing well again. Once this happens, you can say that India is back on track and the consumption engine is moving forward.

Are home loan rates attractive enough?

We are hoping that the RBI continues with another couple of rate cuts. I think, home loan rates are now at 7.7% (with reference to the SBI mortgage rate). This is the lowest since the last 15 years, except in 2015, when it had touched 7.5%. Lower rates are going to trigger higher home sales this year. If you see, home sales were higher in 2019 compared to a year earlier. The demand-supply in real estate is also stabilising because the sales have been higher than the launches.

When will growth come back?

I think the industry will come back to growth after FY21. The next financial year will be another year of consolidation and strengthening. Most businesses are not in a hurry to grow. Most smart players are using this period as a time to strengthen, stabilise, restructure, focus on training and invest significantly in technology.

I think this is a great way to invest in technology because even the old credit vs the new credit way of approaching credit has all these parameters like partnering with banks. Technology plays a big role in partnering with banks. It matters when you tap new credit opportunities in smaller towns and cities.





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