After a strong pullback, the Indian market refused to decline further. As market sentiments are improving, the expert commentary is getting more and more positive. June has been a month of recovery. Now, even the financial sector is reporting that activity levels are returning to pre-lockdown levels.

No more lockdown blues?

The lenders have noted that collections have now reached comforting levels of 50-70% in June. It is expected to improve further towards 60-80% in July next month. The trend is positive across all the segments including housing, car-loans, 2-wheeler loans, CV loans and even micro-finance.

The demand for credit remains weak. Among automobiles, the demand for commercial vehicle(CV) loans remains the most subdued. However, in the insurance segment, renewal collections are now reaching 80% of pre-lockdown levels; new premium levels are also up more than 50% with demand for term-insurance gaining strong traction.

The cleanup act:

Nothing could be worse than losing one's life savings in a banking scam or an economic crisis. The horrific images of seeing the plight of PMC bank depositors must have been still fresh in most of our minds.

Major reform has been taken up to avert any such crisis in the future. The central government has declared a mandate to bring co-operative banks under the RBI's supervision.

The RBI will be given powers to supersede the board of directors of cooperative banks after consultation with the respective state governments. It will also have the power to change the complete ownership structure of banks and allow the central bank to fix mergers for failing banks quickly.

Key takeaways:

The ordinance is important considering the co-operative banks have seen multiple balance sheet crises in recent years. Decelerating economic activity has led to a further pile-up of non-performing assets for them. These banks will now require support from the RBI to steer through the current crisis.

Subdued credit cycle remains a concern. However, lenders are relieved with a fewer number of borrowers opting for a moratorium. In fact, monthly instalments have started flowing again which is a big positive for the economy.