Synopsis: Kotak Mahindra Bank is optimistic about the MSME sector's demand for working capital and term loans in the second half of the fiscal year, driven by rural development initiatives under Prime Minister Modi. The bank anticipates higher capital expenditure from infrastructure and agriculture sectors.
Kotak Mahindra Bank is optimistic about increased demand for working capital and term loans from the MSME segment in the second half of the fiscal year, spurred by rural development initiatives under Prime Minister Modi.
The private-sector lender is placing a significant bet on the micro, small, and medium enterprises (MSME) sector, expecting a rise in demand for loans due to prioritizing rural uplift in Prime Minister Narendra Modi's third term.
Kotak Mahindra Bank anticipates higher capital expenditure demand from sectors like infrastructure, agriculture, and related industries in the coming months.
"As consumption demand rises, it will drive demand for working capital and term loans in the MSME space," said Manish Kothari, President and Head of Commercial Banking at Kotak Mahindra Bank.
"We're seeing a slight increase in utilization, and I'm hopeful that loan demand and utilization will grow in the second half of this year."
Kothari, who oversees Kotak Mahindra Bank's nearly Rs. 1 lakh crore commercial banking business, believes that small and medium-scale industries will lead a revival in capital expenditure.
"MSMEs must be the growth trigger because when the large corporate cycle begins, the entire supply chain will advance," he said.
"Government schemes supporting MSMEs will boost capital expenditure. As volatility decreases and inflation lowers, MSMEs will likely stock more, aiding working capital utilization. We're already seeing measured capital investments."
Recent GDP numbers indicate a slowdown in rural consumption, prompting the newly formed NDA government to signal targeted reforms to uplift the rural economy affected 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 positive sign, indicating a good season in the second half of the year," he said. "With the NDA government returning, the continuity of infrastructure-related policies is a good signal. The government is focusing on supporting rural areas and farmers, which is beneficial for the semi-urban and rural landscape."
Kothari also expressed hope for a favorable turn in the interest rate cycle to improve the financing environment.
"We're looking forward to the budget in July for rural-centric announcements. If inflation eases with a normal monsoon, a favorable interest rate cycle will support the financing environment," he said.
In conclusion, Kotak Mahindra Bank is highly optimistic about the MSME sector's prospects in the latter half of the fiscal year, driven by rural development initiatives and a predicted normal monsoon.
The bank anticipates increased demand for working capital and term loans, particularly from sectors like infrastructure and agriculture.
With supportive government schemes and a potential turn in the interest rate cycle, Kotak Mahindra Bank expects a significant boost in loan utilization and overall economic growth in the MSME segment.
