Credit in India: The bad, the ugly and the horrible
The bad, the ugly...
Lending for private sector is one big thing that has been consistently debated as unreasonable in India. There are various charges against it but the summary is that the terms and conditions are most unviable as rates are almost 5% above the feasible point for business viability, specially for the large msme sector of India.
We should not be surprised that Jio has decided not to keep any loans in its modern day company.
While Startups look for easy wins which are primarily driven by VC funding. Softbank seems to be driving half of this world here, which is helping big time in terms of generating employment.
No one can afford 10-20% interest rates while the operating margins are still at 5-20% that Indian Economy allows. The situation has been getting worse every year. Prices of the packed food and fmcg products have remained the same for last 5 years with growing costs, squeezing the overall margins. On top of that, there are too many terms and conditions for credit.
Check this The great Indian credit squeeze
The horrible...
In terns of overall economy, inflation is low, hence our PPP GDP growth is significant even though current $ gdp has not grown that well. You can check lot of info here:
World Bank Data for Indian Economy
The economy skid started in 2016. This also caused NPAs, apart from the other bad things that happens when economy slows down. This created cyclic loop - Banks became even more wary and the lending rates remained high -- but oh, the economy is still slowing down so more NPA comes. Eventually, no one will be able to borrow and hence, even lower economic activity.
Whatever, it is, but it has to be drastic. Mediocre level financial planning and budgeting will not work.
No one can afford 10-20% interest rates while the operating margins are still at 5-20% that Indian Economy allows. The situation has been getting worse every year. Prices of the packed food and fmcg products have remained the same for last 5 years with growing costs, squeezing the overall margins. On top of that, there are too many terms and conditions for credit.
Check this The great Indian credit squeeze
The horrible...
In terns of overall economy, inflation is low, hence our PPP GDP growth is significant even though current $ gdp has not grown that well. You can check lot of info here:
World Bank Data for Indian Economy
The economy skid started in 2016. This also caused NPAs, apart from the other bad things that happens when economy slows down. This created cyclic loop - Banks became even more wary and the lending rates remained high -- but oh, the economy is still slowing down so more NPA comes. Eventually, no one will be able to borrow and hence, even lower economic activity.
Whatever, it is, but it has to be drastic. Mediocre level financial planning and budgeting will not work.
Comments
Post a Comment