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| 'The dharma of banks is to lend' |
| Business Standard / Aug 16, 2009, 00:40 IST |
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Rahul Bajaj, Chairman, Bajaj Auto, says there are only demand-side problems for corporate India. The only supply-side problem is power. Excerpts:
What is the biggest risk for corporate India at this point of time?
Whether the monsoon came or not, the bigger single problem in totality for industry is demand. We live on demand, by and large. There is no supply side problem.
I am not referring now to wheat or rice, which also is not a problem. We have 50 million tonnes of stock.
The only supply side problem has been power, and with a bad monsoon, hydel power will continue to be a problem. Other than that, most industries continue to have spare capacity, so demand is a major consideration because the world has not started significantly improving. I don’t believe that will take place early next year at the earliest.
One problem with corporate India, despite the RBI lowering key policy rates by 300-400 basis points is that banks are still risk averse. Why is bank perception about corporate India still unchanged?
The dharma of banks is to lend, that’s their job. If they’ve got NPAs in the past, it will take time to write them off. I am not saying lend to people who will not return your money, lend to the right customer. Demand is what we need in answer to your question.
One thing appears clear, the recovery, whatever recovery means, will start earlier in India than in the developed world.
It could start from the last quarter of this calendar year. If not, then early next year; nobody can guarantee that.
VERBATIM
We’re still not sure exactly how the monsoon will pan out. Clearly, the kharif agricultural output will be less than expected earlier... There would be some effect on the FMCG sector, but my expectation is that it won’t affect the sector that much. In the previous years of poor rainfall, FMCG has not been affected much.
Adi Godrej,
Chairman, Godrej Industries
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