Tag: disbursements

‘Disbursements set to grow, while NPAs will decline’

Banking & Finance

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Mahindra and Mahindra Financial Services has seen an improvement in rural sentiment as the second Covid-19 wave ebbs. Ramesh Iyer, Managing Director and Vice-Chairman, Mahindra Finance, says demand is picking up and collection efficiencies are improving. In an interview with BusinessLine, Iyer said the company will look at expansion in the second half of the fiscal and is well capitalised for its business plans. Edited excerpts:

What kind of growth do you expect this fiscal?

Compared to previous years, the disbursement will be high. I see that volumes will pick up for auto loans, tractors, pre-owned vehicles. Disbursements will see a growth trajectory and NPAs [non-performing assets] will have a declining trajectory.

How confident are you of a reduction in NPA levels?

NPAs in the first quarter were purely due to a liquidity problem for customers, where they couldn’t earn enough and delayed payments. Otherwise, they are not defaulting customers. I would call them as a delay and not a default. We are confident that the customers who have delayed their instalments would definitely pay back.

Mahindra Finance: Macro sentiments turning positive in July

Are there more restructuring requests since the first quarter?

We had about six lakh eligible customers, but we did restructuring for only 60,000 in the first quarter. I would not expect the restructuring numbers to be very high this quarter but there could be some demand from commercial and passenger vehicles. It could be 30,000 to 35,000 customers. In terms of exposure, along with what we did in June, it should not account more than 4-5 per cent of the book.

Is demand picking up?

Even during this pandemic, we didn’t see too many cancellations, but dealerships were closed. With the opening-up in June, we did see volumes pick up and it continued in July. Normally, July and August are not great months for vehicle purchase. People wait for the festival season. This could also be pent-up demand from the first quarter. We all hope and pray there is no severe third wave; and with a good monsoon one could expect both September and October to do well, especially as infrastructure work gathers pace. With both of that happening, it could be a good buoyant story from a rural perspective.

Mahindra Finance posts Q1 net loss of ₹1,573 crore

Will this be a year of expansion for you?

It will be a mix in terms of people and branches. We will definitely add in the second half. By then we will know, the third-wave behaviour, if any, and we will also know how the harvest is panning out. We are also ensuring adequate investment in technology. We have built a very strong digital and AI team, and they are looking at various processes that can be digitised. Our data team is looking at the millions of data we have and coming out with forecasts based on trends.

Are you looking at new products or focus areas?

From our point of view, it’s important to capture three areas for further growth. We have created a very strong SME [small and medium-sized enterprises] vertical, where we are working with a large Mahindra ecosystem, and other OEM [original equipment manufacturer] ecosystem, where we will support suppliers for their capex or working capital requirements. We have chosen three industries to work with — auto, agriculture and engineering — where we think there is a lot of play for SME players. In the vehicle segment, pre-owned vehicles will be a good growth segment. As infrastructure opens up, tractor volumes will pick up. Many OEMs in cars are also reaching out to rural markets with their launches and that can become a natural synergy for us to gain volume. We do believe that leasing in the next three years will become a prominent play. We have set up a digital finco for small-ticket consumer durable and personal loans. The platform is live but this is a testing year. While we have done some loans, from April you will see a lot of aggression in this business.

Are there any outstanding issues for NBFCs?

The issue of liquidity has been addressed now. If at all the third wave happens and impacts customers, then expectations would be for a moratorium for customers. In restructuring, typically, customers are a little worried about the interest burden; but in a moratorium, they are very clear that they will not have to pay an instalment for a certain period. It helps both the company and the customer.

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CreditAccess Grameen’s collection improves to 94% in Jan-March quarter

Banking & Finance

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CreditAccess Grameen, a NBFC-MFI, said its collection efficiency (loan EMIs collected from women borrowers) as also its year-on-year (YoY) and quarter-on-quarter (QoQ) loan disbursement (microfinance loans given to women borrowers) has improved during the January to March 2021 quarter.

The company in a release said it YoY and also QoQ consolidated disbursement has risen by 42 per cent and 3 per cent to ₹4,726 crore, respectively in January to March 2021 quarter. The collection efficiency for CAGL, too, has risen from 91 per cent in December 2020 to 94 per cent in March 2021 and for its subsidiary Madura Microfinance, collection efficiency increased from 86 per cent in December 2020 to 90 per cent in March 2021.

The number of women customers fully paying their loan instalments, has risen to 92.4 per cent in March 2021 for the company, as compared to 88.1 per cent in December 2020. The percentage of women customers not paying their EMIs, for the company, has come down to 4.4 per cent in March 2021 compared to 5.1 per cent in December 2020.

Active borrowers

The performance is on the back of a number of active borrowers rising to 29.63 lakhs for the company and 10.98 lakhs for its subsidiary. The new borrower addition during the January to March 2021 quarter, too, has seen a healthy rise to 2.88 lakhs on a consolidated basis. The consolidated Gross Loan Portfolio, too, has increased YoY by 16 per cent and QoQ by 13 per cent to ₹13,878 crore.

Owing to improved performance, the overall portfolio at risk for 30 days, 60 days and 90 days, has seen gradual decline to 6.6 per cent, 5.9 per cent and 5.4 per cent, respectively for the company as on March 31, 2021.

Regarding its subsidiary Madura Microfinance, the overall portfolio at risk for 30 days, 60 days and 90 days, gradually declined to 9.7 per cent, 6.7 per cent and 4.7 per cent, respectively on March 31, 2021. The restructured book amounts to ₹75 crore (0.6 per cent of GLP) as on March 2021 for CreditAccess Grameen.

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‘In Q4, we are looking at growing the business, but methodically’

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The micro-finance sector is showing signs of improvement barring some lagging areas and customer sets. However, there is demand for credit, said Nitin Chugh, Managing Director and CEO, Ujjivan Small Finance Bank. In an interview with BusinessLine, he also spoke on the new products the bank is working on and discussed the third quarter results. Excerpts:

How is the micro-finance sector doing now?

In general things have improved, which is coming up in the collection efficiency of 94 per cent to 95 per cent. We had reported in our second quarter results that we have problems in Maharashtra, Punjab, and West Bengal, and haven’t come back to the pre-Covid level. In Assam, while things were improving, we have had a setback in January due to the loan waiver announcement by political parties, and (that) has resulted in 9 per cent drop in collection efficiency (during the month).

Even in customer segments, there is some divergence. Customers with general stores, and dairy were able to come back rather quickly. Those in small-scale manufacturing are taking longer to come back. Customers like housemaids, drivers, restaurant staff and mall workers were impacted for a much longer time.

Also read: Ujjivan SFB reports net loss of ₹279 cr in Q3

How has the restructuring process been?

You can’t expect or even plan for such things. The moratorium got over on August 31, 2020. September was the first month when customers started making payments. We had a collection efficiency of 83 per cent for payments, which improved to 88 per cent in October. But there are customers who are finding it difficult to pay after the moratorium got over. The whole estimation process started from October; we started talking to customers and did a full detailed survey. We spent December holding individual conversations and completing the whole process.

How is credit demand? You have reported strong disbursement in the third quarter.

Credit demand has started to come back as people started going back to their livelihoods.

Disbursement is even stronger in January. Demand is from all across. We did our highest ever in January in the affordable housing business. In MSME also, we did our ever highest in January. In micro-banking, we are back to pre-Covid level and exactly what we were in January 2020. In fact, in December 2020, we did even better than December 2019 in micro-finance. Likewise in vehicle finance. In the fourth quarter, we are looking at growing the business now but doing it methodically with the appetite for risk that we have.

You are working on gold loans…?

We are still learning the business. We are in pilot stage right now. We started in October with five branches, all of them in Bangalore. The first two months were not very remarkable as we were trying to do this more through word of mouth. We will launch it at scale in the next fiscal year. It is an unmet demand of our customers.

Also read: Assam MFI Bill may hit collections in short term

Any other new areas of lending?

In vehicle finance, we are testing MMCV (micro and mini commercial vehicle) loans. We are likely to make an entry into that segment. We were also evaluating the used car segments but with the Budget announcements on voluntary scrapping policy, we need to do some rethink on that. The segment of customers we deal with, they usually buy five- to seven-year-old vehicles and they buy them for a long period of time.

We are also looking to introduce credit cards in the next financial year. We have a substantially large base of retail, non-micro-finance customers. We have a large base with close to a million customers and the demand for these products is coming from them. We will also look at any other relevant product. Also, maybe lockers in a few of our branches.

Are you worried about stress on your books?

Now, we are not. We have taken all provisions upfront in the third quarter. Stress is emerging right now, the NPAs are at a standstill. We already had a cover on our books of 4.1 per cent to 4.2 per cent in the last quarter. It wasn’t that we were not adequately covered, we had taken provisions in the last three quarters also. We took the decision to upfront everything. Let us not live with any uncertainty and not worry about future credit loss, so that we can focus on growth.

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‘We have not sold a single loan to any ARC’

Banking & Finance

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The turnaround for YES Bank has been much faster as it could usually take at least two to three years, believes Prashant Kumar, Managing Director and CEO, YES Bank. In an interview with BusinessLine, Kumar said the bank is hoping to continue with the growth in advances in the fourth quarter with good demand from retail and MSME segments. Edited excerpts:

How has the bank managed such a robust growth in net interest income?

Some of the recovery has been booked as interest income, which has given a boost to the NII. This robust growth in NII will continue but it will depend on whether you will make recovery for interest. This may not happen in all the cases; normally there is always a haircut.

How is the growth in advances?

We had set a target of ₹10,000 crore of disbursements in the third quarter for retail and MSMEs and we disbursed ₹12,000 crore. Corporate disbursements were at ₹2,000 crore. We are seeing demand from the retail and MSME segments but corporate demand is yet to pick up.

We were earlier lending to large project finance companies on the corporate side but we are not doing that as a strategy now as we don’t have that kind of size of balance sheet. But we will definitely participate in working capital requirement and small requirement of term loans like ₹300 crore on the corporate side but not very large. Aviation, hospitality and real estate have been impacted badly by the pandemic as well as sectors related to entertainment, and shopping malls.

For the fourth quarter, we have not kept a target on advances but would like to do the same as the third quarter.

Also read: This is the peak in terms of NPAs and slippages: YES Bank chief

How have operating expenses come down?

We are avoiding wasteful expenses. Due to the pandemic, we realised people can work from home. In our Mumbai building, we have vacated two floors from 12 floors and will be in a position to vacate another two floors in the coming months. Similarly, in Delhi, we have shifted our premises from Chanakyapuri and are moving to Noida.

So, will the bank go for branch expansion?

In terms of business growth, we need to expand the branch network. Till now, our branches have been concentrated largely in northern and western India. Our presence in southern, eastern and central India is very small. We need to wait for two to three quarters but we are coming out with a strategy of opening branches in the areas where we are not there. Branch expansion will be a part of the strategy but we need to wait and see the real impact of the pandemic.

Also read: YES Bank posts Q3 net of ₹151 crore

What about deposit mobilisation?

Growth on deposits is always a slow process. Earlier, YES Bank’s deposit was at ₹2-lakh crore plus. But at that time, there was a very large deposit book of the government, which has come down. Some States are not placing deposits with private sector banks and we are also not getting deposits from the Central government. The government deposit book was ₹45,000 crore but now it is only at ₹7,000 crore to ₹8,000 crore. On retail and corporate deposit book, we are back on track. Our focus will be to open CASA accounts.

What is happening on the bad bank proposal? Are you looking to sell off any NPAs?

We are waiting for regulatory approvals. We have not sold a single loan to any ARC (asset reconstruction company) and we have no plans. If we are able to set up our own ARC, then we will transfer it to our own ARC. Selling doesn’t make any sense, it brings in hardly 20 per cent. We are able to recover much more.

What are your expectations from the Budget?

Real estate has been impacted by Covid-19 and has been under difficulties in the last three to four years. Addressing this sector is important as a large number of people are also impacted. People are paying EMIs but not getting their flats. This sector, if taken care, will give a boost to infrastructure. Banks would be able to recover their loans and the government will also get huge taxes. Also, hopefully the Budget will continue to provide support to MSMEs. It has a big role in the GDP and needs support in terms of releasing payments, protection, and ease of doing business.

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