Debt restructuring, car sales strength

The RBI’s new framework for banks to restructure loans to struggling borrowers should help ease near-term cash flow issues for firms and households that have been severely affected by the lockdown, but we doubt it will fully prevent an eventual surge in non-performing loans. Meanwhile, the continued improvements in car sales in July is in contrast with other indicators showing that the post-lockdown economic recovery has stalled. We suspect this is mostly a reflection of consumers making purchases that would have occurred during the lockdown, so purchases should drop back once this backlog clears.