Last year or 2015-16 (FY2016) India had achieved a growth in real GDP of 7.9%. Thisyear or FY2017 it is expected to be lower at 7.1% according to the second advanceestimate released by the Central Statistics Office (CSO). There are several reasons forthis lower growth. Among them I need to emphasise a few.
The first is insufficient investments not for a single year but across the last fiveyears. Consequently the share of gross fixed capital formation to GDP has steadily fallenfrom 31.7% in FY2015 to 31.1% in FY2016 and now to a low of 29.2% in FY2017. Unlessinvestments pick up in FY2018 and the years ahead I can't see how we as a country canattain sustained real GDP growth of 7.5% over the next decade.
The second is the burden of bad loans or non-performing assets (NPAs) in the bankingsystem. At the end of December 2016 the gross NPAs of India's 27 public sector banksstood at Rs. 647759 crore. This was a 140% increase over two years. And such NPAsaccounted for 12% of these banks' total loans and advances. It is possible that theproportion may be higher still. The fact is that with such severe stress these banks haveno appetite for advancing loans for longer term investments. It is as if a key financialintermediary in the growth process has chosen to stay out.
It would be all too easy to say that the third cause was demonetisation which wasunleashed on 8 November 2016 involving over four-fifths of the currency in circulation.There is no doubt that the process caused hardship and pain to citizens as well asbusiness. Yet strange as it may sound the latest national income estimates do not pointto any severe compression in GDP growth in the third quarter of FY2017. If the CSO's dataare accurate and I have no basis to believe otherwise it would appear thatthe negative effect of demonetisation on GDP growth may have been less than what we tendto surmise.
Even so FY2017 was a difficult year with lower growth than what we had all expected.In such a milieu I am proud to share with you the excellent achievements of your CompanyBajaj Finance Ltd. (BFL). Here are some key facts:
New loans booked exceeded 10 million in numbers which is a first for theCompany.
Assets under management increased by 36% to Rs. 60194 crore.
Receivables under financing rose by 33% to Rs. 56832 crore.
Total income grew by 36% to Rs. 10003 crore.
Profit before tax increased by 43% to Rs. 2818 crore.
Profit after tax increased by 44% to Rs. 1837 crore.
Loan losses and provisions were Rs. 818 crore. BFL's net NPA stood at 0.44% andwas among the lowest in the NBFC industry.
Capital adequacy as on 31 March 2017 was 20.30% which is not only higher thanthe previous year but also well above the RBI norms. Tier I capital adequacy was 14.56%.
To achieve results such as these in a relatively tough year is extremely commendable.And to keep on generating such superior performance year after year clearly demonstratesthe execution strengths and capabilities of your Company's Management team. On yourbehalf allow me designations to congratulate everyone in BFL led by Rajeev JainManaging Director Sanjiv Bajaj and Nanoo Pamnani both Vice-Chairman of the Company forsuch outstanding results. Here is a Company that we should be justifiably proud of.
As was the case last year your Company has done well across each of its product suitesspanning six major business verticals: Consumer Lending SME Lending Commercial LendingRural Lending Deposits and Partnerships and Services. I leave it to you to read thechapter on Management Discussion and Analysis in this Annual Report to appreciate how wellBFL has done in each activity.
All of this has been backed by excellent internal controls cost and risk managementsystems and perhaps the best-in-class analytics among all banks and NBFCs in India to notonly understand how to optimally garner the right kind of customers but also to know whenand how to quickly recalibrate operations according to altering risk profiles.
Let me repeat a sentiment that I shared with you last year. Given the systems that havebeen put into Bajaj Finance and the depth and width of managerial DNA across theorganisation I have no doubts that your Company will perform at least as well in FY2018as it has in FY2017.
Once again my thanks to the entire BFL team. And to you for your support.
17 May 2017