In the initial phase of the crisis, till the point where the credit guarantee scheme and the moratorium came in, credit was mostly flowing to larger creditworthy companies.
HSBC India's Rajat Verma
India’s consumption story is set for a comeback, and HSBC India will support companies allied to it, Rajat Verma, head – commercial banking, told Shritama Bose in an interview. The RBI’s current account circular is a good step directionally and banks are looking forward to the FAQs on it, he said.Excerpts:
How did you see companies approach the Covid crisis in terms of fund-raising and expansion?
Right at the beginning of the crisis, there was a bit of panic. We had mid-market and large companies calling us, worried whether credit and banking services would be available. Companies who had spare limits started to hoard liquidity and that was something that we saw all over the world. Sometime in June-July, things started to come back to balance when people started to go out. The story of every sector could almost be predicted based on how freely that sector was allowed to operate by the pandemic.
In the initial phase of the crisis, till the point where the credit guarantee scheme and the moratorium came in, credit was mostly flowing to larger creditworthy companies. As the schemes were brought in and the economy started coming back to a more even keel, credit got more widespread.
Did the moratorium help your borrowers, especially MSMEs, effectively get their houses in order?
Absolutely, it did. Not just MSMEs, but more generally, certain sectors were so badly impacted that they needed the oxygen and the breathing time so that the pressure didn’t become too much. All the discipline is good, but it’s good in normal times. For a small garment shop owner or for someone who runs a mall in a mid-sized town, cash flows were gone. When there are no rentals, even landlords get affected and so there was a negative cascading effect. You had to allow people to slow down for a few months and recover. So I am all for the moratorium and this was done in many countries.
You would have already got some recast requests from your smaller borrowers. How are you approaching that?
As long as we are convinced that it is a genuine issue due to Covid or due to the pain in the last seven to nine months, we are looking to support it. There is absolutely no stigma attached to this. As long as we believe in the company, we will continue to support it. I must add that it is a small portion of our books. It is not a material issue for us. The quality of our book is strong.
Banks have got an extension for the implementation of the August 6 current accounts circular, but there are still challenges, including technological ones, when it comes to implementation. What is the right way of going about it?
While the endeavour to create a tighter credit culture is a good step directionally, clarity on all aspects of operationalisation is important. There will be an FAQ to address queries on this circular and its impact. We look forward to more clarity on its operationalisation.
Which are the sectors you are bullish on and whom would you avoid?
We are very bullish on anything related to the consumption story. Consumption will come back in India with a roar, and not just basic consumption, but also around mobiles, two-wheelers, cars and other things. All the companies aligned to consumption will benefit. We are very bullish on renewable or sustainable energy. We see the next wave coming in not just in terms of solar panels or windmills for power, but also mobility, storage and co-generation. As a country, we must also support the NBFC and microfinance sectors because of their reach and capabilities. Pharmaceuticals and biotechnology are growing. We are also reasonably positive on commercial real estate and malls.
There are no sectors that we would absolutely stay away from. In our India business, we do not like (companies) with a lot of cash and industries which are difficult for us to reach and understand.