Last year, or 2015-16 (FY2016), India had achieved a growth in real GDP of 7.9%. This year, or FY2017, it is expected to be lower at 7.1% according to the second advance estimate released by the Central Statistics Office (CSO). There are several reasons for this lower growth. Among them, I need to emphasis a few.
The first is insufficient investments, not for a single year but across the last five years. Consequently, the share of gross fixed capital formation to GDP has steadily fallen from 31.7% in FY2015 to 31.1% in FY2016, and now to a low of 29.2% in FY2017. Unless investments pick up in FY2018 and the years ahead, I can''''t see how we as a country can attain sustained real GDP growth of 7.5% over the next decade.
The second is the burden of bad loans or non-performing assets (NPAs) in the banking system. At the end of December 2016, the gross NPAs of India''''s 27 public sector banks stood at RS, 647,759 crore. This was a 140% increase over two years. And such NPAs accounted for 12% of these banks'''' total loans and advances. It is possible that the proportion may be higher still. The fact is that with such severe stress, these banks have no appetite for advancing loans for longer term investments. It is as if a key financial intermediary in the growth process has chosen to stay out.
It would be all too easy to say that the third cause was demonetization, which was unleashed on 8 November 2016, involving over four-fifths of the currency in circulation. There is no doubt that the process caused hardship and pain to citizens as well as business. Yet, strange as it may sound, the latest national income estimates do not point to any severe compression in GDP growth in the third quarter of FY2017. If the CSO''''s data are accurate — and I have no basis to believe otherwise — it would appear that the negative effect of demonetization on GDP growth may have been less than what we tend to surmise.
Even so, FY2017 was a difficult year, with lower growth than what we had all expected.
In such a milieu, I am proud to share with you the excellent achievements of your Company,
Bajaj Finance Ltd. (BFL). Here are some key facts:
- New loans booked exceeded 10 million in numbers, which is a first for the Company.
- Assets under management increased by 36% to RS, 60,194 crore.
- Receivables under financing rose by 33% to RS, 56,832 crore.
- Total income grew by 36% to RS, 10,003 crore.
- Profit before tax increased by 43% to RS, 2,818 crore.
- Profit after tax increased by 44% to RS, 1,837 crore.
- Loan losses and provisions were RS, 818 crore. BFL''''s net NPA stood at 0.44%, and was among the lowest in the NBFC industry.
- Capital adequacy as on 31 March 2017 was 20.30%, which is not only higher than the previous year but also well above the RBI norms. Tier I capital adequacy was 14.56%.
To achieve results such as these in a relatively tough year is extremely commendable. And to keep on generating such superior performance year after year clearly demonstrates the execution strengths and capabilities of your Company''''s Management team. On your behalf, allow me designations to congratulate everyone in BFL, led by Rajeev Jain, Managing Director, Sanjiv Bajaj and Nanoo Pamnani, both Vice-Chairman of the Company, for such outstanding results. Here is a Company that we should be justifiably proud of.
As was the case last year, your Company has done well across each of its product suites spanning six major business verticals: Consumer Lending, SME Lending, Commercial Lending,
Rural Lending, Deposits, and Partnerships and Services. I leave it to you to read the chapter on Management Discussion and Analysis in this Annual Report to appreciate how well BFL has done in each activity.
All of this has been backed by excellent internal controls, cost and risk management systems and perhaps the best-in-class analytics among all banks and NBFCs in India, to not only understand how to optimally garner the right kind of customers but also to know when and how to quickly recalibrate operations according to altering risk profiles.
Let me repeat a sentiment that I shared with you last year. Given the systems that have been put into Bajaj Finance and the depth and width of managerial DNA across the organization, I have no doubts that your Company will perform at least as well in FY2018 as it has in FY2017.
Once again, my thanks to the entire BFL team. And to you for your support.
Rahul Bajaj Chairman
17 May 2017