Hello everyone, 

Welcome to the 53rd edition of The Pattern, a weekly newsletter where we dissect and analyse the latest from finance, economy, and technology. Let’s get started. 

Is the economy healthier than it seems? 

They say that when it rains, it pours. Considering the meltdown in the financial markets on the back of banks failing, interest rate hikes, and a consistent barrage of bad news from across the globe - it does seem that India isn’t getting the worst of it. Yet. 

Even though the stock market has been highly volatile, the red in the market isn’t reflected in the fundamental economic indicators. 

The daily average fuel consumption soared to its highest level in February this year, beating all previous highs since the series started being recorded in 1998. Fuel consumption is one of the fast-moving indicators that indicates business activity, consumption, and the economy's overall health. 

This was paired with a substantial increase in electricity generation, GST e-way bill collections, toll collections, and, most interestingly - electric vehicle sales increased to 6% of total vehicles sold in February - up from 1.5% a year ago. 

Hello everyone, 

Welcome to the 53rd edition of The Pattern, a weekly newsletter where we dissect and analyse the latest from finance, economy, and technology. Let’s get started. 

Is the economy healthier than it seems? 

They say that when it rains, it pours. Considering the meltdown in the financial markets on the back of banks failing, interest rate hikes, and a consistent barrage of bad news from across the globe - it does seem that India isn’t getting the worst of it. Yet. 

Even though the stock market has been highly volatile, the red in the market isn’t reflected in the fundamental economic indicators. 

The daily average fuel consumption soared to its highest level in February this year, beating all previous highs since the series started being recorded in 1998. Fuel consumption is one of the fast-moving indicators that indicates business activity, consumption, and the economy's overall health. 

This was paired with a substantial increase in electricity generation, GST e-way bill collections, toll collections, and, most interestingly - electric vehicle sales increased to 6% of total vehicles sold in February - up from 1.5% a year ago. 

Then why do things seem so gloomy? 

If I were to hazard a guess, it’s a mix of economic uncertainty, market volatility, global cues and the nature of news at play. 

First, even with the decent economic situation in India, it’s difficult for most of us to perceive long-term stability with the larger global volatility. A bank failing anywhere is bad news, but two banks failing in a span of a week in the West is akin to telling a child to not worry about their safety while a house burns down outside their bedroom window. 

Second, the market volatility isn’t helping the cause. The recent spate of layoffs in startups and an overall negative sentiment associated with the technology sector is contributing to wild movements in the market indices that make things seem worse than they could be. 

Third and most importantly, it could also be news-iness bias. Only negative or shocking stories ever make it to a news broadcast. It’s even taught in journalism schools that you don’t write a ‘dog bites man story’. You write a ‘man bites dog’ story. So, over-indexing a few significant events and social media's flame-throwing capacity can make everything look too bleak, even for the most ardent optimists. 

This isn’t to say that all is well. All I intend to do is bring to light a certain disconnect between the data and the narrative and urge us to find more evidence to find a way around or through it. 

That said, let’s move our attention to certain sobering developments. 

Recovering from collection woes

Good lenders have large loan books. Great lenders have the best collection rates. Lending is  a collection business, and a bank or an NBFC must pull all stops to collect the money that’s no longer being repaid. 

However, the banking regulator is drawing firm boundaries to ensure that lenders or their collection agents don’t cross many lines and the entire process is much more humane towards the borrower rather than a harrowing experience of harassment. 

The RBI has reportedly fined RBL Bank a whopping Rs 22.7 million for violating regulatory compliance regarding the collection agents it onboarded, basis complaints received between 2012-2022. 

“The RBI said RBL failed to ensure that the loan recovery agents it engaged during those periods did not resort to intimidation or harassment and that it did not ensure police verification of the agents before employing them,”  reported Reuters. 

My colleague Shamolie wrote an entire series of pieces about the importance of humanising finance and especially using technology for making the business much more effective without it leading to a worse customer experience. I highly recommend you read the pieces on  loan servicing  and  collections . 

Meanwhile, HDFC is inviting bids for its wholesale bad loan portfolio amounting to Rs 1100 crore. The highest bid is  reportedly lower  than even 47% of the total portfolio - prompting the lender to look for more bids as it seeks to extract the last possible pennies from a massive hit to its loan portfolio. 

At the same time, long-time markets moghul Sanjay Dangi is  eyeing the lending industry  and has been buying up assets of NBFCs. It took control of Reliance Commercial Finance Ltd last year and is in the process to acquire Reliance Home Finance Ltd too. The company is bidding for even more NBFCs and is looking to give itself a headstart by stitching together infrastructure, home loans and retail lending platforms. 

Interesting times. 

Between the digits 

80% -  Average haircut expected in Reliance Commercial Finance and Home Finance Ltd firms’ resolution plans. The overall outstanding is more than Rs 20,000 crore. 

2,50,000 -  The RBI is  cracking down on spam  in the BFSI space and has registered more than 2.5 lakh vetted telemarketers in a whitelist database it’s building— long way to go.  

Rs 730 crore -  Insurance firm Digit’s underwriting loss for the year 2021-2022. The firm might have  another go at an IPO but it’s saddled with more than Rs 296 crore in losses. 

Reading list 

1. LegalPay launches India's first pay-later product for legal expenses

2. FinTech far from saturated, 50X growth possible: Dilip Asbe

3. App isn’t enough. Here’s how lenders can become truly digital!

4. What makes FinBox BankConnect 10x faster than other bank statement analysers

5. Payments Are A Utility, Banking Is Not. Let’s Separate Them.

Thank you for reading. If you liked this edition, forward it to your friends, peers, and colleagues. You can also connect with me on Twitter  here  and follow  FinBox on LinkedIn  to never miss any updates. 

Cheers, 

Mayank 

All opinions expressed are own and do not necessarily reflect the views of FinBox or its promoters.