It won't be a Diwali that will change sentiment: Axis Bank chief

Do not expect the festive season to change the prevailing negative sentiment in the economy, says Axis Bank chief Amitabh Chaudhry. Non-bank lenders continue to face troubles of asset quality and liquidity squeeze and no significant turnaround should be expected in that segment before 12-18 months, Chaudhry tells Saloni Shukla. Edited excerpts:What is your assessment of the state of the Indian economy?I haven’t seen any improvement. Let’s cut across sectors… consumer goods is telling you that things are not good, auto was down anyway, steel is not doing too well, we are now seeing that SMEs are impacted because payments are not coming on time, malls reported that footfalls are low, ecommerce sites reported a 30% rise in sales but that is not a benchmark, it could have been higher. The ground situation is still the same and it will take time for it to change.The government has quickly taken a lot of actions, but it will take a couple of quarters to trickle down. Changes in corporate tax will take time to yield results. They have talked about clearing GST dues, let’s see when that translates fully. They are talking of loan melas, but initially no one will start disbursing loans. I am sure these were loans that were approved earlier and were given as part of the loan mela. On the ground, the improvement is not very tangible today, but it is not expected to be tangible immediately.Most say this is a temporary slowdown. You speak to so many clients, what is your on-ground calculation?Government spending has come back after elections but the private sector is not spending money. The Indian entrepreneur today is a worried lot because of all the things they are seeing around them. My worry is that the Indian entrepreneur does not have money and with all these things going around, they are holding back. It will take some time for them to come back into the system. (Investigative) agencies have become very active, so even where the government has agreed to spend money, projects are halted in the tracks.There were a lot of hopes pinned on the festive season, but early signs are not enthusing. What is your sense?We are not going to have a record Diwali. Last year’s Diwali was also a bit subdued. Numbers are up but are they going to change the metrics in a big way — I don’t think so. On the asset side, we lend a lot to salaried employees. The economy has slowed down; when they read so much of negative news around them, they just hold back and postpone the purchase. It will not be a record Diwali that will change the sentiment.The NBFC situation continues to look dire, fresh stress keeps coming up, is there any recovery in sight?Bad news keeps coming from this sector. Look at DHFL, it has only got worse. IL&FS — only Rs 20,000 crore of the problem has been solved. In the meantime, some more companies have defaulted. First it started with liquidity, now we see asset-quality issues, the moment I suspect that I want to run away from you.Fresh stress is constantly coming up; even your bank reported higher stress…There is no sectoral issue per se. We know the promoters where things have gone bad quickly. We are seeing additions rather than subtractions and lot of promoters are giving up. We are also seeing unexpected names come up; earlier promoters were able to manage issues within the company, now they can’t because fund diversion is being watched very closely. The economic environment is also not helping at all; some new private banks are facing issue and old private banks are not. So, yes there are signs of new stress and I think that will continue.What is the endgame for this negative sentiment?As the economy starts looking better, the asset quality situation will improve. People are expecting a magic bullet from the government; I don’t think a magic bullet exists. There are demands of an equivalent of a TARP (Troubled Asset Relief Program) programme like it was done in the US. But how do you do it and who do you bail out? If you select some, then there will be political issues.On the bankruptcy code, it’s just stuck. Is there any recovery in sight ?The process is just drifting, money is stuck … and I am now worried that will the bidders stay around forever. Because some bidders might say this process is just too painful and fraught with uncertainty.

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