NBFCs would do well to avoid term lending in the coming 9/12 months and stick to lending thru the Supply chain financing route to push liquidity to existing customers against their purchases of raw materials / key services and also focus on the receivables financing for them . This will enable them to maintain and monitor transaction level control to ensure upstream and down stream visibility . Necessary technology platforms will need to be put in place for managing such transaction based funding. We believe it would be prudent to avoid term risks at this stage till the haze clears and full impact gets known.

The Covid package announced by the center may not be sufficient incentive to push banks to lend directly to MSMEs . Many of the PSU banks are undergoing mergers, the process for which will continue though this year and the major part of the next financial year , making them averse to lending .

We believe that the Private sector banks may not be sufficiently incentivized to lend against the guarantee scheme announced by the Honble FM .

On the retail financing side – Used cars , Two wheelers and small cars in the new car segment is expected to pick up fast post easing and presents a good opportunity . I have stated this before in my other posts .

Sanjoy Banerjee

These are my personal views

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