Budget 2020 Expectation: Umesh Revankar, MD & CEO, Shriram Transport Finance, spoke about Union Budget and his expectation for NBFC sector, liquidity conditions and steps that can boost the demand among others during an interview with Swati Khandelwal, Zee Business. Edited Excerpts:

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Q: What are your expectations from the Union Budget for the NBFC sector particularly?

A: There are different types of companies in NBFC like infrastructure, financing companies, wholesale lending, moderate financing companies, vehicle financing company and gold financing companies. I would like to talk about only retail financing companies because we are into vehicle financing and SME funding, i.e. we lend just lend to self-employed and entrepreneurs, who are termed as priority sector because banks lend them. Thus, we lend to the farmer, SME, and entrepreneur. We tend to lend to those customers who can't reach to the banks. 

Overall in the priority sector lending, our inclusion in any of the lending that is made by the bank will help them to meet their target and allow us to reach to the customer. Currently, the banks have a target of 40% for the priority sector every year on the net increase in lending of which just 5% is being done through the NBFCs. If opened more than several NBFCs will be able to reach to the right customer and the last mile. I think that it should be opened and the banks and NBFCs should work together when it comes to priority sector lending. We are dependent on the banks and that's why we can't compete with them, however, we play a complementary role and it should be mentioned. 

Q: Recently, the government in its announcement talked about the creation of a special fund, which will include the stressed assets of NBFCs. How viable it is and can you tell the way it has moved till date? How it will help you?

A: I have read about it through the media but am not aware of it and that's why can't make any statement on it. RBI, earlier, discussed a refinancing window with the NBFC. Have read the government's fund initiative through the media but am not aware of its shape, what it is and who is eligible for it, however, we will welcome it if we have a refinancing window because there should be a fallback arrangement for the last minute for any NBFC. There should be a special window and special fund as it will boost the confidence of the NBFC and it will also ease the lending process of the banks and other institutions. 

Q: What is the situation of cost of funds and is there any kind of reduction in the borrowing rates in this sector specifically?

A: Borrowing cost has come down by 10-15 basis points. I think it will come down in the future because more liquidity is available with the banks. Increased liquidity will fasten the lending and transmission process of the banks. 

Q: Has liquidity conditions has improved and do you think that more money is required in the system or you feel that the issue has been resolved completely? 

A: Liquidity has been resolved and I don't think that liquidity is an issue anymore, especially for large NBFCs like us, who has its presence since last 40 years. But small and new NBFCs are facing challenges yet and this is something that we hear when we meet. However, I feel that the liquidity situation is much much better and it will be better in the next two months.  

Q: The government is facing the problem related to consumption-led demand which is slightly low at present. What steps the government take to boost consumption? Do you think that personal income tax cut can provide a solution or it should announce certain schemes that can incentivise your investments?

A: I feel, it should be seen after dividing rural and urban into two parts. Urban needs are different than rural. Urban has a major focus on buying a house/flat and this is a challenge for them but they are not quite eager to buy even their first house because they are not sure about the revival of the real estate sector and what if there is a depreciation in the property that is bought by us. At the same time, the availability of ready flats is also a challenge. At the same time, people are also postponing their plans to buy new homes because of the incompletion of projects in which they were invested in the past. This postponement leads to a reduction in consumption as they have shifted their attention towards the completed projects. This postponement also leads to their plans to buy a new car or durables. That's why I feel the government should encourage the real estate sector, the incomplete projects should be completed and people should be incentivised to but properties especially to those who are planning to buy their second or third houses in terms of income tax.

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When it comes to the rural area then they are facing challenges related to infrastructure. Roads and telecommunication have reached these areas but they are facing challenges related to portable water, drinking water, sanitation, school and hospital among others, which hasn't reached the region yet. The availability of these facilities in the rural areas will give a pause/end to rural to city migration and encourage them to create some industry, business or job in the region. Thus, two different types of infrastructure creation will be good for the economy. 

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