No need to extend Kamath committee timeline, says Axis Bank

Credit growth to large industries stood at 0.5% in October 2021 as compared to a contraction of 1.8% a year ago, according to data released by the RBI.

The resolution framework laid down by the Kamath committee in September 2020 mandated lending institutions to ensure meeting certain financial parameters by March 31, 2022. In August 2021, the deadline was extended to October 1, 2022.
The resolution framework laid down by the Kamath committee in September 2020 mandated lending institutions to ensure meeting certain financial parameters by March 31, 2022. In August 2021, the deadline was extended to October 1, 2022.

There is no need to extend the timeline prescribed for meeting operational targets for accounts restructured under the Kamath committee guidelines, Axis Bank’s deputy managing director (designate) Rajiv Anand said on Tuesday.

“I think there is some conversation that is going on currently among some of the banks with the RBI (Reserve Bank of India) to extend the Kamath committee timelines. We are not seeing any need to do that at this point of time,” he said.

The resolution framework laid down by the Kamath committee in September 2020 mandated lending institutions to ensure meeting certain financial parameters by March 31, 2022. In August 2021, the deadline was extended to October 1, 2022.

Anand said Axis Bank has seen fairly strong capex in renewables and around production-linked incentive schemes in electronics, solar cells and others. “We’re seeing strong demand around roads, ports, speciality chemicals, data centres — that is a big area where we’re seeing capex. It is fairly widespread at this point in time,” he said.

Anand said over the last two years, quite a few companies have been able to fund fairly large capex through their own internal accruals. In addition, there has been an element of scepticism over the last three months as companies tried to better understand consumption patterns amid the possibility of subsequent waves of the pandemic. “But that confidence is now back and we do believe that private capex demand, as we look at 2022-23, will be much stronger than what we’ve seen over the last three to five years,” he said.

Credit growth in the banking system has been anaemic in the last few years, due in large part to muted demand from large companies. In recent months, demand has improved a little. Credit growth to large industries stood at 0.5% in October 2021 as compared to a contraction of 1.8% a year ago, according to data released by the RBI.

Axis Bank will focus on growing both its wholesale and retail books with a focus on meeting its internal criteria on underwriting and pricing. At present, the lender is seeing more growth on small and medium enterprises (SME) and mid-corporate, with both being relatively small-ticket assets, Anand said.

The bank’s SME book is behaving better than what it had anticipated, according to Anand. “Business has come back very strongly — MSMEs are talking about capex, the fact that their exports are growing strongly, that import substitution due to some geopolitical issues are in their favour. But, at the same time, some of these supply chain issues are what they’re grappling with. Therefore, within the formal sector, our books are actually behaving better than we had anticipated,” he said.

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