In a big push to revive the economy, Prime Minister Narendra Modi on Tuesday announced a Rs 20 lakh crore package - nearly 10 percent of India’s gross domestic product (GDP). This includes the government's recent announcements on supporting key sectors and also measures rolled out by the Reserve Bank of India (RBI). Amitabh Chaudhry, MD and CEO of Axis Bank shared his views and outlook. He further said that the government needs to provide support to the economy to prevent non-performing loan formation.
“The impact of this lockdown is widespread across all industries, it is no longer restricted to some. It will take more time for the economic activities to pick up. It is going to continue to remain tough for some period of time. Yes, the NPLs would rise. What we need is support to the economy so that these people can come back to business quickly and start producing the cash flow so that the NPLs don’t happen or they are lower,” he said.
“There is so much liquidity in the system that we are not able to deploy it effectively, I am talking about the banking system overall and because we are not able to deploy it or it is being parked with RBI, there is a negative pressure on the NIMs across the banking system because the cash which has been there is not getting deployed but yes as gradually and slowly government comes out with the schemes of this nature where the deployment of some of this excess liquidity starts happening, the NIMs should hopefully come in line,” he added.
“If NPLs rise and if moratorium is not given or some kind of one-time restructuring is not allowed, that will again have a negative impact on NIMs. So let us see how this plays out, next three-six months will determine that,” said Chaudhry.