Unlock BFSI 2.0: Economy reviving, no need to extend moratorium, say SFBs

Heads of top small finance banks stress on the need to be more flexible in the current scenario and back 'emotional banking'

The heads of some of India's top small finance banks on Wednesday said that things now were looking up for the sector after the lifting of coronavirus-induced lockdowns, and that they would get even better in the coming days.
 
Speaking at the third session of Business Standard’s six-part Unlock BFSI 2.0 webinar series, they also said the Reserve Bank’s (RBI's) decision to allow a moratorium on loan repayments was a step in the right direction and people were not misusing it, but they agreed that there was no need to extend it beyond August as the economy was now getting back on its feet. Saying that banks needed to be more flexible in the current scenario, they also stressed on the need for “emotional banking”.

 
The discussion was moderated by Tamal Bandopadhyay, consulting editor, Business Standard.
 

The panelists in the session, titled ‘Small finance banks — It's time to make it big’, were Ujjivan SFB Managing Director & Chief Executive Officer Nitin Chugh, Equitas SFB Promoter & Managing Director P N Vasudevan, Jana SFB Managing Director & Chief Executive Officer Ajay Kanwal, AU SFB Managing Director Sanjay Agarwal, Suryoday SFB Managing Director & Chief Executive Officer R Baskar Basu and Microfinance Institutions Network Chief Executive Officer & Director Alok Mishra.
 
AU SFB's Sanjay Agarwal said that the economy was beginning to look up, barring three or four sectors, and better collections showed that customers had every intention to pay. "Despite the moratorium, if I have a collection efficiency of 90 per cent, it just shows the resilience of the economy," he said.

Equitas SFB's P N Vasudevan said banks’ recovery speed was very fast, as its customers were mostly into daily-use products and services. He said although his bank started with a 90 per cent moratorium in May, this dropped to 50 per cent in June, and 43 per cent in July, and was expected to fall further. He further said that the bank's relations with customers were strong and it stood by them in the current hour of need.
 
Ujjivan SFB'S Nitin Chugh said that the lender offered the moratorium to all its customers by default and also educated them on the moratorium. "We were brave enough to offer moratorium to all our customers and stand by them," he said. "Our recovery rate in July was 65-66 per cent, and it is improving. We have educated our customers about what it means to take the moratorium."

 
Suryoday's R Baskar Basu said his bank did not chase customers for collections and instead focused on educating them on the moratorium. "If you make them (customers) feel they are delinquent, their behaviour might change. We got in touch with them for educating them about the moratorium, not for recovery," he said.
 
Jana SFB's Ajay Kanwal said while the bank started with a moratorium of 93 per cent in April, it was down at 33 per cent in July. Although he expressed confidence in the bank's customers, he said: "There will be some opportunistic people, less than 1 per cent, who would use the moratorium as an excuse for not paying." However, he noted that the loan ticket size was so small that it would not be a problem for the customer to pay back.

 
Microfinance Institutions Network's Alok Mishra said that most of his bank's customers (small-ticket borrowers) dealt in essential items and their businesses were fast approaching normalcy. He, however, expressed concerns over local-level interferences. "There will be some small-time institutions that will try to instigate borrowers that the moratorium could be turned into a loan waiver. These vested interests have to be aggressively checked; for this we need policy support," he said.