Mumbai: Private-sector lender Kotak Mahindra Bank is betting big on the micro, small and medium enterprises (MSME) segment, and sees fresh demand for working capital and term loans in the second half of the current fiscal year, as rural uplift takes priority in the third innings of Prime Minister Narendra Modi.
Kotak Mahindra Bank expects sectors such as infrastructure, agriculture and allied industries associated with it to see higher capex demand in the coming months.
“As consumption demand picks up it will aid working capital and term loan demand in the MSME space,” said Manish Kothari, president and head-commercial banking at Kotak Mahindra Bank. “We are seeing an uptick in utilisation by a few percentage points. I am quite hopeful that the loan demand and its utilisation will increase in the second half of this year.”
Kothari, who handles Kotak Mahindra Bank’s nearly ₹1 lakh crore commercial banking business, believes that small and medium-scale industries will lead a revival in capital expenditure.
“MSMEs have to be the trigger for growth because when the large corporate cycle kicks in the entire supply chain will move up the curve,” he said. “The government schemes also help MSMEs that will give capex a boost. As volatility reduces MSMEs will look to stock more and with inflation coming down, I am hoping that will aid working capital utilisation. We are already seeing measured capex investments.”
The latest GDP numbers have signalled a slowdown in rural consumption. This has led to the newly formed NDA government signalling targeted reforms to uplift the rural economy battered by erratic weather and weak rabi crop yields.
Kothari added that infrastructure spending will revive loan demand in the second half of the fiscal year. “The prediction of a normal monsoon is a big positive which means it should be a good season from the second half of this year,” he said. “The busy season starts from September onwards, and with the NDA government coming back, the continuity of infrastructure-related policies is another good signal. The government is already talking about giving support to rural areas and the farmers because the rural demand has got impacted. All of this bodes well for the semi-urban and the rural landscape.”Kothari added he hoped for a turn in the interest rate cycle that would aid the financing atmosphere. “One is looking forward to the budget in July to see what rural-centric announcements are made. And if inflation eases with a normal monsoon, a turn in the interest rate cycle should also support the financing environment,” he said.
