By Hariprasad Radhakrishnan
The Covid-19 crisis is a good opportunity for companies to plan for the future, as many business models and customer behavior are expected to change in the post-crisis scenario, says Nitin Chugh, MD and CEO, Ujjivan Small Finance Bank. In an interview with Hariprasad Radhakrishnan, Chugh said that the bank adopted an opt-out moratorium on repayments for its microbanking customers, as they would need it most while opting for others in opt-in policies. Fragments:
How do you think the lockdown would affect the quality of your microfinance book’s assets? What is the impact on your rural borrowers?
Borrowers have been affected everywhere, not just rural borrowers. In our case, however, most of our borrowers run their own businesses, while a very small proportion of borrowers depend on their daily income. Once the lockdown is over, companies should be able to get back on track faster than people who depend on daily wages. It is difficult to say how they are affected. Given that we’ve had a well-managed book all along, I think we’ll be better off and well prepared.
Have your refunds been affected so far?
We had to stop our microfinance repayments a day before the closure was announced. Our field activities were discontinued on March 23. There is a very small portion that comes through digital refunds. For all practical purposes, on micro banking, there are currently no refunds. In any event, a moratorium of payments applies to the loans.
How does Ujjivan roll out the moratorium for its borrowers?
Most payments had already come before March. The recovery is due for April and May and for those who did not repay in March. For micro banking, we’ve expanded it for everyone because they would need it the most. For all other companies, the offer is for everyone, but customers must make a request. We contact customers and some of them contact us. We take these requests from customers in need and make changes to the system. It is opt-out for micro-banking, but all other customers must opt for a moratorium.
What is the bank’s strategy to deal with the crisis?
Our strategy is to ensure the well-being of our employees and customers at this time. We have created a series of authorized teams. We connect a lot with our customers and offered them free doctor consultations almost two weeks ago to check for any kind of symptoms. Our senior management and HR team monitor the wellbeing of our employees. Our branches are now operational with very limited staff. Business continuity plan is functional and ATMs are functional. We are also in touch with our customers’ deposit side. We encourage our customers to use digital channels. This is a good time for us to plan a different way of operating in the future, because a lot will change after this. We will see many changes in business models and customer behavior. We need to be better prepared for the post-crisis scenario.
When do you expect payouts to increase?
It is too early to say it now. If I need to provide additional loans to my repeat customers, no personal interaction is required and telephone interaction may be good enough. Maybe they can be recovered faster. If it is a new customer, a personal interaction is required. A field visit is required for a real estate loan or a business loan, which will not happen soon. We’ll see how it turns out. Our level of preparedness will remain high.
Do you think that the crisis may cause problems with regard to the stability of deposits with small financial banks?
I don’t want to generalize, but small financial banks are just as safe, stable and reliable as any other category of bank. If we have already seen that, we see these concerns with some of the larger private sector banks and occasionally with public sector banks. Now the RBI governor has made sure that people don’t have to worry about their deposits with any of the banks. Small financial banks are much more regulated than universal banks. There is no reason to think there is less security there. Ujjivan has the highest solvency ratio of 28.3%. We are strong in portfolio quality, governance and management. Our customers believe in us. None of the customers were concerned and did not come to us to ask that question. So we have no problems with deposits.