On 30th of October, ASSOCHAM in its report projected that 25 to 30% jobs could be slashed in real estate, IT, steel, financial services and aviation as a cost cutting exercise. Reacting to which the GOI vehemently criticized the report touting it as “outrageous”. Under the severe pressure, ASSOCHAM had to revert back by withdrawing the report. But the reality could not be shrouded any way. We heard that, pink slips were to be offered in banking, IT sector.
The venomous impact of recession was realized by apex bank and it was on its way to resurrect the situation. The RBI has taken every step to infuse the money in banking system by gradually reducing the CRR and SLR. Most of expert says that fundamentals of Indian banking system are strong and the impact of global crisis would be very minimal but the reality of banking system is yet to come.
Real sector companies have borrowed Rs 75000 crore from banks and Rs 25000 crore from mutual fund companies. The NPAs of banks might increase in the end of December quarter because of recession in the economy. The individuals, who are losing their jobs or whose salaries getting chopped off, might become defaulters in coming months, these kinds of defaults, we may see in real sector, auto loan, credit card and personal loan. The uncertainty about jobs and salaries will also affect these sectors’ growth. The default may come from corporate as well. The real sector companies are feeling the heat as the bubble of real sector has burst and there is less number of customers in the market. To lure these customers they are giving offers like 1BHK is free with 2 BHK to meet out their costs. The Banks are pressurising them (corporate and real sector companies) to pay their debts as banks themselves are facing crunch of money. The major concern of banks is their asset-liability mismatches which may hurt their profits. Over the last three year, banks have funded their long term credits via short term liabilities, mostly deposits, large part of which were corporate bulk deposits and certificates of deposits.
The various measures have been initiated by banks in order to mitigate the risk of defaults. They are denying loans (personal, auto, housing etc.) and credit cards to individuals belonging to IT companies, BPOs, real sector, aviation, and financial institutes ( NBFCs, brokerage houses, insurance companies) and in other cases strict scrutiny is being conducted before lending.
The real impact of recession and its casualties are yet to be grounded before us which will be taking place at the end of this financial year. On the basis of those we will be in situation to count our wounds and may be in position to predict the correct diagnosis in future.
Mayank
PGPABM-I
MANAGE
1 comment:
Yes the worst is yet to come. Adding to the article, to my experience last month when I travelled 4 times (to n fro) via train, to my shock all passenger trains were on time(infact IN time) at every station, which has never been the case. Guess the reason? Its becoz the goods trains are not running.
One of the passenger “Mr Aditya” working at bokaro steel plant shared that, the Iron ore traders were complaining, where they use to trade 500mt, now its just 50mt (in his words). No sooner but we are realizing the real impact of recession.
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