I had slipped into a fairly long self imposed sabbatical on writing my blogs and now, feeling the need, I am starting again to write – and thus the title of my first blog version 2.0.
In ophthalmic terms, 20/20 means clarity or sharpness of vision. Ironically, 2020 has started with anything but that. Anywhere you look there is uncertainty, concern and a looming feeling of upcoming serious problems..
- The US-China trade war,
- The most recent eye to eye of USA and Iraq,
- The increasing compromised values, principles and ethics in politics,
- The natural disaster in Australia
— all point to a not so stable planet this year and …its not been 10 days into the year.
In the financial sector, 2019 saw the catastrophic consequences of two otherwise well reputed companies
- IL&FS and DHFL – failing for different reasons.
- The PMC Bank crisis then was the proverbial last straw – I hope.
No one thought that these three collapses will have the contagion impact on the sector as it so turns out to be – and the story is still work in progress. Enough has been written about these two organisations – what matters is for all of us to learn some underlying lessons and far reaching impacts as a consequence. So:
- The banks and mutual funds have lost confidence in the NBFCs and HFCs and generally refuse to lend or roll over earlier loans .
- Credit expansion has slowed down impacting real estate, the auto industry and others too.
- Consumer confidence is shaken and people are more careful in spending which in turn impacts credit growth and manufacturing.
- The real estate sector has huge stressed assets to deal with and further unsold property and incomplete property is an upward rising graph.
- Individual depositors have struggled to recover deposits they placed with these Instituions – deposits probably placed thru incentivised brokers with conflict of interest.
- Shareholder value has eroded – in these companies.
Then we have political issues causing agitation and violence, an economic slowdown, rising oil prices and most importantly a feeling of gloom and “worse to come” – which may not be untrue.
As a collective country, whilst we cannot do much at the global level, nationally, we need to, together break this downward spiralling sentiment. As various positives are initiated, like
- Sector specific initiatives from the Government (the real asset stressed fund),
- A response by the real estate industry,
- The banks regaining confidence in good quality borrowers in the sector,
- Regulatory responses to try and ensure no repeats from the lessons learnt and
- Quick resolution of the current issues with any institution that finds itself distressed will actually help in making 2020 take the first steps to a fresh start.
Specific initiatives will happen, but a nationwide will and determination is required with several stakeholders “biting the bullet”.
It’s not all gloom – the hour before the dawn is the darkest and hopefully, we are seeing that darkness!
It’s also the year of the cricket T20 World Cup – and Blue is the colour to adorn the cup !!