Click here to visit
Davos 2020: Cantor Fitzgerald’s Anshu Jain says India's NBFC sector still paralysed
January 23, 2020

Davos 2020: Cantor Fitzgerald’s Anshu Jain says India's NBFC sector still paralysed

India remains a a positive long-term story, Anshu Jain, president of Cantor Fitzgerald, told CNBC-TV18 in an interview at the sidelines of the World Economic Forum in Davos.

The International Monetary Fund (IMF) on Monday slashed India's gross domestic product (GDP) growth rate by 130 basis points to predict a 4.8 percent growth in FY20. However, Jain feels the downward revision notwithstanding, India's "long-term story remains resolutely positive."

“The long-term story remains resolutely positive. The demographic dividend which India enjoys, the fact that it is a delinked economy in some ways from trade tensions which are going on, it has got endogenous demand. So there are many factors which are long-term and positive and those haven’t changed,” said Jain.

“Undoubtedly, we have seen a slowdown. Some of that is in sympathy with the world economy slowing down; India is part of the global supply chain and the world economy.”

One of the reasons for India's economic slowdown has been attributed to the crisis in the non-banking finance companies or NBFCs. And Jain agreed with the problem of credit plaguing the country.

“The specific factor in my mind and especially behind consumer demand slowing down is indeed credit. Let us not forget, 30 percent of all the credit creation in India — that’s nearly a third — came from NBFCs and for two years now coming up there has been virtually no credit extension of growth from the NBFCs.

“The banks are also working through their distressed loan portfolios. Hence, loan supply there has slowed down as well. So India is a credit constraint economy. I think policymakers, regulators, the government understand that very well and steps are taken and as that happens and credit conditions ease, I am actually optimistic that growth will pick up,"

He continued: “NBFCs mushroomed, we famously know this. Asset liability discipline was not always in place, leverage might have been excessive and we have seen this in many other countries before and that said the sudden slamming of brakes which has happened, not just on NBFCs but bank balance sheets as well.

“India is a giant economy which is growing at 10 percent nominally. Credit expansion needs to continue to be at the same pace as GDP growth and if you take a look over the last year and a half, NBFCs complete brakes been slammed and even banks’ balance sheets have not grown as much as you do want it. So do we need a return to where we were two years ago? Do we need credit conditions to ease and credit extension to start again? Absolutely.

“So far I have to say, I find the NBFC sector still more or less paralysed. I don’t see extension of credit to the NBFCs in the quantum that is required,” he added.