The private sector lender, Bandhan Bank, does not foresee much hiccup in debt collection in installments from microfinance clients once the nationwide freeze is lifted, director and CEO Chandra Shekhar Ghosh said Monday.
Although microfinance loans fall under the guise of deferring installments for three months after the Reserve Bank of India directive, Ghosh said he believed that customers would not usually use the moratorium as it would lead to increased EWI (assimilated weekly installments) for them.
“After imposing the lockdown, we stopped using microfinace collections. Our bank’s policy is that if we couldn’t meet our microfinance borrowers, there would be no demands on installments on our part. Since we are now unable to go to the ground floor for collections, there is no demand for delivery. After the lockdown is released, we can start collecting activities. We are very hopeful. There is no cause for alarm, ”he said.
“A microfinance customer can opt for the EWI moratorium. But when we contact customers by phone to make them understand the arrangement, most of them say they will not have a moratorium because it will bring higher EMIs, ”Ghosh told FE.
Bandhan Bank, in a stock market record, said on Monday that because of its microbanking collection efficiency, pan-India for the period January 1 to March 21 was 98.7%. The total amount overdue on March 31, 2020 was lower than December 31, 2019. “Furthermore, deposits from microbanking customers remain strong and stable despite three weeks of locking,” the lender added in the application. Notably, the 21-day nationwide lockdown was imposed on March 24 to stem the spread of coronavirus. Prime Minister Narendra Modi will address the nation on Tuesday amid indications that the shutdown could be extended by another two weeks, with certain relaxations to spur economic activity.
“If the debt collection operations at Bandhan Bank were impacted to a certain level even after the lockdown was over due to the impact of some customers’ income during the lockdown period, the bank could provide additional loans for existing loans or COVID-19 loans to support them to overcome poor cash flow and reboot their businesses, taking into account their payback capacity, ”sources said. Notably at the end of the third quarter of the previous financial year, the microfinance loan was approximately 61% of Bandhan’s total loan book size.
Loans and advances increased 10% quarter to quarter to Rs 71,825 crore (approximately) for the fourth quarter from Rs 65,456 crore for the third quarter. Loans and advances grew by 60% year-on-year in 2019-20, from Rs 44,776 crore on March 31, 2019. Total deposits grew by 32% yoy to Rs 57,873 crore during the fiscal end of March 2020. The bank had total deposits of Rs 43,232 crore at the end of March 2019.
The bank said in its application to the BSE: “The liquidity coverage ratio (LCR) on March 31, 2020 was 161%. On March 31, 2020, the bank had an excess of Rs 8,402 crore. In addition to the above, the bank is able to raise to Rs 1,815 crore under MSF of RBI. ”