Suryoday Small Finance Bank (SSFB) will step up focus on cost management, recovery and serving existing customers well amid the pandemic. Business growth will necessarily follow as a result of this, according to Baskar Babu R, MD & CEO.
In an interaction with BusinessLine, Babu said his bank continues to maintain substantially high liquidity and capital adequacy. So, it will be ready to accelerate lending when green shoots become visible. Excerpts
Do customers in the microfinance and small business loan segments continue to face strain in loan repayment?
As things open up, customers are coming back into the loan repayment track. So, in the current economic cycle, if a customer pays two out of every four instalments, he is considered a good customer. Among our delinquent customers in March 2021, about 76 per cent of them paid an instalment at least in one of the two months — February or March.
Moratorium did a very good thing for the customers as they did not feel that they were defaulting. And co-incidentally because of regulatory and government support, the credit flow continues to the microfinance segment.
In the small business segment, the bounce back usually is much swifter. They start putting their skills/competencies to work. For many such businesses, it is the time value of money
When do you expect lending operations to get normalised?
Given that we have come out of the pandemic, we were far more confident that we will be able to weather the second wave. As we started moving towards normalcy, about 80-85 per cent of the customers started displaying good (repayment) behaviour. We will have to go back to reconnect with the rest.
When it comes to lending a helping hand to customers facing incipient stress, the focus is to do restructuring in a meaningful manner for them to overcome the pain. This will reduce NPAs.
If a third wave does not hit us badly, it will be back to business as usual. We will get closer to normalcy by September.
Will you tweak the way you are doing business in the light of the experience gained from the pandemic?
When it comes to business model, the way in which we will tweak it will be in terms of enhancing our product lines as our customers graduate (from small ticket microfinance loans to bigger loans)…about 5-6 per cent of our total customer base of 1.5 million will be requiring a home loan in the next 12 months.
Given that people are increasingly dipping into their deposits to meet emergency health expenses, how will you ensure that deposits don’t haemorrhage?
Even low-income households are looking at health insurance as a key product. It is no more a product which has to be sold. People realise the importance of having a meaningful insurance cover.
We are planning to roll out a product for a particular savings account variant, whereby the customer will get a complimentary top-up insurance cover of up to ₹40 lakh in the first year….The middle class usually have a health insurance cover or can manage an expense of, say, ₹4-5 lakh. But when a large one-off expense arises, it becomes very difficult to manage. So, we are trying to work out a value-added product.
Two years back, we gave a sachet insurance product to our microfinance customers to cover the losses arising from natural calamities. For a ₹50 premium for two years, the product covered any damage to goods and property up to ₹50,000. We don’t get any commission for this. It is just an add-on product. The penetration is pretty good at about 70 per cent.