BackFresh covid surge not to significantly impact MFI collections: Jana SFB CEO
We are largely a retail business and while we do have a small portfolio which is more than Rs2 crore, it is not a big impact. But we need to wait and see what happens
PremiumMUMBAI: Jana Small Finance Bank has seen its loan disbursements cross pre-pandemic levels for all segments, except microfinance. While a second wave of covid infections in Maharashtra and other states threaten to disrupt collections once again, the impact is expected to be milder this time round.
Speaking to Mint, the bank’s chief executive Ajay Kanwal said the lender is allowing microfinance customers payment rescheduling options to tide over the crisis.
Also Read | The great financial crunch: How the pandemic sank Indian states
Edited excerpts:
How do you read the Supreme Court order in the loan moratorium case?
All of us were always preparing for the moment when this stay order goes away. I think that is not much of a challenge. Then, there is the part of the order that every borrower, even those with more than Rs2 crore in loans, have to be compensated. We are largely a retail business and while we do have a small portfolio which is more than Rs2 crore, it is not a big impact. But we need to wait and see what happens. In our books we were making sure there was enough buffers so that it would not come as a big challenge. I don’t know how this will pan out because we have not heard the regulations. So, I think Reserve Bank of India’s (RBI) direction is awaited.
How are microfinance collections shaping up?
Just so that I don’t give a forward looking or a non-public number, I think it is fair to say the entire industry is in the late 90s (percentage). I think the challenge is in what happens to a customer who could not pay for the last many months. There have been customers genuinely at loss of income, loss of jobs, loss of business. We still have to address the customers who found it difficult to pay in the last few months. I think there will be a couple of more months of making sure that these customers get back on track, their incomes come back and so we will just remain in touch with them, make sure that whenever they are able pay, we collect our dues.
What kind of relaxations are you allowing these customers?
This pandemic was not an intention-to-pay issue by customers. In 99% of the cases, customers have been having genuine financial issues. I still see there will be 1% people who will be opportunistic and use that and try and not pay. So, I will not rule that out, but that will be a very minor percentage. I feel there were two types of customers. One is who said, "give us two more months and we will pay," and one were the customers who said "listen, I cannot pay you the same ₹2,000 or ₹2,500 equated monthly instalment (EMI). Can I pay you ₹1,000 or ₹1,500?" Giving these customers rescheduling or restructuring offers the right answer. And that is what we would totally do, and that is what we have done.
Are you worried that collections will significantly drop if the second wave intensifies?
Honestly, it does not look as significant because you know the lockdowns were very severe last year. If we were doing 99% and above (collection efficiency) in Maharashtra (before the second wave), we would probably do 98% or 97%. You will lose a few days of work; some customers may feel uncomfortable meeting you or your staff may feel uncomfortable going up. There will be a marginal impact.
How do you see the Assam microfinance bill?
It does impact if the customers do not pay on time. We are a signatory to the MicroFinance Institutions Network (MFIN) CRL which is the common responsibility code and is all of us had agreed that we will not do more than three lenders per customers, we will not give more than a certain amount of loan, we will not give loans to delinquent customers. That is very good because in a way it puts industry under discipline and also makes sure the customer doesn’t get over-leveraged. It does bother us that we are in a moment where we have followed the rules, but customers are not really stepping up to pay. Assam is less than 1% of our microfinance book. So, to that extent it is not something which will cause any serious impact.
What are the other growth areas for Jana?
Since covid-19 eased, one of the fastest business has been two-wheelers and housing. Moreover, if you see our gold loan business, we went to Rs150 crore in March 2020 to Rs550 crore in September.
Have disbursements returned to pre-covid levels?
So other than microfinance, all businesses are ahead of pre-covid numbers for us. With microfinance it is just the question of time. I think, it is like a food chain where you start from the top, and it keeps going down. So, I think the economic impact, by the time it starts from the largest company and goes down to the lowest common denominator, will take a bit of time. I think we are close to that moment now.
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