Indian banks are unlikely to see a quick resolution to their 'terrible state' of being saddled by a huge overhang of NPAs despite the new bankruptcy process in the country, according to Bajaj Auto Chairman Rahul Bajaj.
Indian banks are unlikely to see a quick resolution to their 'terrible state' of being saddled by a huge overhang of NPAs despite the new bankruptcy process in the country, according to Bajaj Auto Chairman Rahul Bajaj.
The veteran industrialist also said the country is facing insufficient investments and the current share of gross fixed capital formation to GDP is not enough to support steady-state growth of 7.5 per cent to 8 per cent.
Addressing shareholders of the company in its Annual Report for 2017-18, Bajaj cited the insufficient investments and current state of the banks as two "particularly important" reasons for the slowdown in India's GDP growth.
The Indian economy on yearly basis grew at a four-year low of 6.7 per cent in 2017-18, down from 7.1 per cent in the previous fiscal. The previous low was recorded in 2013-14 at 6.4 per cent.
Describing the present situation faced by many banks in India as a "terrible state", he said, "Saddled by a huge overhang of bad loans or non-performing assets (NPAs) that have eroded their balance sheets and destroyed profits, most banks have neither the requisite financial strength nor the confidence to fund industrial growth." This is not only affecting the bigger players but, much more so, the medium and smaller scale corporate entities across India who are now hard-pressed to secure necessary working capital let aside term loans for investments, he added.
"Despite the benefits that ought to accrue from the new bankruptcy process in India, I do not see a quick resolution to this problem," Bajaj said.
Commenting on the impact of insufficient investment on GDP growth, he said, "Our share of gross fixed capital formation to GDP has been declining over the last six years and now stands at 31 per cent. This is insufficient to bring about a steady-state growth of 7.5 per cent to 8 per cent." On the company's performance, he said Bajaj Auto could have done even better had it not been affected by a decline in domestic motorcycle sales.
"This was not on account of the market as a whole nor due to an overall lack of demand for all types and makes of motorcycles... However, it could not perform adequately in the large 'commuter' segment and sold less than what was expected," he added.
The company continued to do well at the entry-level segment with models like CT 100, Platina and Discover 100/110 as well as in the sports and 'super-sports' segments through Pulsars, Avengers, the Dominar 400 and the KTMs, Bajaj said.
Describing the commuter segment as a "critical" one, he said, "Hopefully, this gap will be taken care of in the next couple of years through existing and new products...and, as I understand, your managing director and his team are expending considerable effort at bridging this gap." In 2017-18, Bajaj Auto had sold 19,74,577 units of motorcycles in the domestic market, down 1.3 per cent from the previous fiscal. The company's exports stood at 13,94,757, up 14.5 per cent.
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 "Quick resolution to bank NPAs problem unlikely: Rahul Bajaj")
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