As harvest season starts, credit demand will resume: Bandhan Bank chief

In a Q&A, C S Ghosh, the lender's MD & CEO says he does not foresee major asset quality deterioration once economic activity resumes

Chandra Shekar Ghosh, MD & CEO, Bandhan Bank says the extra provisioning made by the bank in March quarter should be adequate to take care of any Covid-19-related asset quality pressures. In a telephonic interview with Hamsini Karthik and Namrata Acharya, he explains that as lockdown lifts, demand for loans should resume. Edited excerpts:

Is the extra provisioning in March quarter adequate to absorb any Covid-related asset quality pressures in future?

We have not seen a situation like this before. But if you analyse it based on how we have fared in past instances, whether demonetisation in March 2017 or introduction of goods and services tax in the same year, our 90-day past due (DPD) at 0.4 per cent and 1.5 per cent was far below the industry average of 7–9 per cent. Our experience was the same even during far loan waiver in Uttar Pradesh in 2017 and during Cyclone Fani in Orrisa. Last year in Assam too, our 90-DPD was very low compared to other players. Even in natural calamities, which creates challenges to lives of people, their houses and livelihood, we have fared well on asset quality. However, unlike these instances, in lockdown, people are not seeing their houses and lives destroyed. So once the activities resume, there may not be a huge deterioration in asset quality. We will be able maintain our gross NPA ratio at 1.5 per cent or a little lower.

With lockdown partially opening up from early May, have collection and disbursements improved compared to a total shutdown in April?

We have higher penetration in eastern Indian and rural areas. A majority of the book is in the non-Covid affected regions. So we were able to have about 95 per cent of our bank branch and micro credit offices open. Because of the lockdown, people haven’t been able to travel, even if we were functioning. We have started again on disbursements as some customers have reached out to us for loans. Some are coming to branches and repaying their instalments. So, there is no fear about credit disciple. Disbursements have slowly started and things will normalise as the lockdown is lifted. For instance, the harvest season will start and farmers will need some credit to resume their activities and this will push demand for loans.

The moratorium has been fully availed by MFI customers. What about others?

In housing loans, 87 per cent of customers have paid their monthly instalments as of April 30, 2020 and the number is 65 per cent for micro, small and medium enterprise (MSME) customers. For NBFC-MFIs 40 per cent of them have paid their dues.

Do you see FY21 as a challenging year ahead?

It totally depends on lifting the lockdown, and whether people can start their work and move from place to place. But I don’t expect that within a quarter of lifting the lockdown, everything can become normal.

In FY21, what would be your priority – diversifying the book or focusing on existing portfolios?

We would like to grow our affordable housing segment. SME loans will be another focus point for us and this would allow the customer also to graduate from being a MFI customer to SME customer.

How do you plan to diversify your non-MFI book going ahead?

The increase in customer base outside east and north east for us is about 34.6 per cent. Only east and north east, the growth has been about 14 per cent. Geographically we are diversifying. Secondly, in terms of book composition, the microfinance portfolio has come down from 85 per cent to 64 per cent in one year.