2018 is going to be a year where India starts reaping the benefits of the policy changes made in 2016-17 by the Central Government. This will give a big boost to businesses leading to increased demand for funds from Financial Institutions and also, improvement in asset quality.
Looking back at 2017, the year started off with demonetisation still fresh in people’s minds and with the apprehension of what is likely to be in store next. While demonetisation has caused some slowdown for Small and Medium-sized Enterprises (SMEs) in 2017, over the longer term it is going to be a blessing in disguise as it has forced several businesses to organise themselves better and integrate with the formal economy.
This will also help Non-Banking Financial Companies (NBFCs) and banks to better serve the SME segment because the financial documents submitted will give a more realistic picture of the financial position of the borrower without the NBFC having to estimate/ guess what their liquid income is.
The next big change which impacted business during 2017 was the Goods and Services Tax (GST) implementation. There was a slow-down during the run-up to GST, as businesses put purchases on hold and focused on clearing all stocks in hand. This was possible because of ambiguity relating to certain areas of how GST would be operationalised. For Lenders, this translated into slow growth in business credit and delays in repayments as sales were low.
However, GST is likely to open up several new business opportunities and has already helped the country to significantly improve its world ranking on the ease of doing business. The real benefits of GST will start to accrue from 2018 which is going to make it a very exciting year for businesses and therefore for Banks and NBFCs too.
Finally, Non-Performing Asset (NPA) management has been one of the biggest focus areas for banks during 2017, leaving the playing field open for NBFCs to capitalise on the available funding opportunities. The new insolvency and bankruptcy code, which is operationalised through the National Company Law Tribunals (NCLTs) promises to be an effective tool for banks to clean up their balance sheets and get set for taking on new business in 2018.
At Insta Capital, we are extremely bullish about the business scenario in 2018. This creates immense scope for growth in lending, especially unsecured lending to businesses seeking working capital funds to scale up their operations to maximise profitability. We believe that with our focus on ensuring timely disbursal of funds and ensuring ease of borrowing, we will continue to adopt latest technologies and grow our book with strong asset quality.
(The writer of this article is Ravi Bajaj, Director, Insta Capital Pvt Ltd)