2019-08-11_Business_Today

COVER STORY> LIQUIDITY

light. In the last four years, the outstanding bank credit
to the sector has been stagnant at 72,000 crore. The infrastructure industry saw lending from banks dry up. Even though the government is pumping in crores, the average 2 per cent growth in banks lending to infrastructure in the last four years shows a heightened risk perception. “We are not going to finance green field infra projects,” Axis Bank CEO and Managing Director Amitabh Chaudhry had announced when he took over in January this year. IDFC First Bank Managing Direc- tor and CEO V. Vaidyanathan has taken a decision to completely wind down the bank’s infra book in the next five years. Similarly, others like ICICI Bank and public sector banks (PSBs) have turned extremely cautious in lending to the infrastructure where one-fifth of the total loans are currently under stress. “There was some stability in February and March but again in April there were challenges: there was li- quidity crunch and demand was not forthcoming, ex- cept in the retail segment which gets a push due to elec- tions. Project construction or big infrastructure projects have come to a standstill,” says Anil Kumar Chaudhary, Chairman, SAIL. “People do not have money to make the purchases even though they are out of stock and want to make the purchase. They are waiting for the right time,” he adds. Small and medium enterprises are running from pillar to post to find project finance. “Banks are consid- ering only small-value proposals up to1 crore. Their fo-
cus is more on micro loans, especially Mudra loans. The
SMEs have been completely left out,” says Chandrakant
Salunkhe, Founder and President of SME Chamber of

India. Further to this, banks are not considering restruc-

turing proposals either. “They are aggressively placing

SME promoters in the ‘wilful defaulter’ (category) for

technical reasons like utilising working capital loans for

buying land or plant and machinery,” he adds. If an ac-

count gets classified as a wilful defaulter, its credit lines

are stopped.

NBFCs had stepped in to lend to SMEs in the past

few years, evident from the high levels of loan against

property (LAP) given by them. Non-banks have actu-

WHAT LED TO THE LIQUIDITY

CRUNCH

RBI’s asset quality review

of banks leads to hidden

NPAs tumbling out

Banks’ lending to infra,

power, steel and other key

sectors halts because of rising

NPAs and lower capital

Demonetisation floods banks,

mutual funds and insurers

with deposits

While banksthat faced asset quality

deterioration are cautious in lending,

easy money flows from other banks

and mutual funds to NBFCs and HFCs

Infra financing institution IL&FS

defaults, creating panic among

investors like mutual funds

Fund houses, insurers, cash-rich

corporates and HNIs stop rolling

over NBFCs’ commercial paper

Banks refuse to lend to

NBFCs fearing loan losses

System level liquidity

plunges into deficit for the whole

of 2018, also due to dollar

outflows, slowdown in govern-

ment spending and high level

of currency with public

Rating agencies turn cautious;

downgrade ratings. Credit lines

become difficult

Asset liability mismatches

start surfacing across

NBFCs and HFCs

“There is simply no money

available even for good

businesses to expand”

NIRANJAN HIRANANDANI

Co-founder and Managing Director,

Hiranandani Group

32 IBUSINESS TODAYIAugust 11 I 2019