The development momentum that had fizzled out in January has returned in February and March and it is probably to sustain, Umesh Revankar, MD & CEO, Shriram Transport Finance Company, tells Shritama Bose. The company’s credit expense may perhaps remain close to 2.5%, he adds. Excerpts:
What could be the effect of the new scrappage policy on automobile sales?
We require to be clear on the scrappage policy due to the fact these are draft recommendations. We are not certain about the final issue. One issue the government has talked about is the automobile getting scrapped at the scrappage centre. Who are going to run these scrappage centres? Is it a private or government body? That is not incredibly clear. Who will repair the price tag of automobile scrappage? They’ve pointed out 4-6% of the present price tag. That is one location exactly where unless there is clarity, we’ll not be capable to comment.
The second location exactly where clarity is necessary is the particular person who owns a automobile for more than 15 years. If it is located not match to run, then it will be scrapped. In that case, the owner will get a certificate, and avail some advantages if he buys a new automobile. Our suggestion is that the certificate must be transferable so that the particular person who in fact buys a new automobile can use it. A particular person who has a more than 15-year-old automobile is unlikely to obtain a new automobile. They are probably to obtain a second-hand automobile. These are the two big points – a transferable certificate and who runs the scrappage centres and fixes rates – exactly where we require clarity.
During the festive season, we had observed an uptick in development across lending categories, but it fizzled out thereafter in some segments. What has your knowledge been?
The demand has been pretty superior, even though there was a slowdown in January. It picked up in the second half of February and March is getting pretty superior. For new cars, demand is superior. The very same applies for building gear and building cars. I really feel that will continue for one more couple of months due to the fact in April-May the agri output is going to be bumper and numerous building activities are probably to kick-begin. The momentum observed in March would continue to be positive.
Is there a possibility, specifically in the building segment, that development could once again slow down if Covid situations continue to surge?
I do not consider so. In Maharashtra, even though there are some worries, my impression is that the government will not go for any type of a lockdown. They will go for restrictions like evening curfew. So, there may perhaps not be any effect on building activity.
What trends are you seeing in terms of asset top quality? How a great deal of your book has been restructured?
Our restructuring was planned initially for about 3%, but now it appears like our restructuring would be much less than 1% due to the fact numerous of the segments exactly where we had initially anticipated challenges are now functioning typically. Tourism and urban transportation have turn into typical. Only in college buses there are some challenges exactly where schools have not began, as also in employees transportation. That is much less than 1% of our portfolio. MSME loans are much less than 2% of our book, and there clients have currently availed the credit assure. So, the restructuring solution is not out there to them. In terms of all round repayments, just about one hundred% is back to typical.
Your Q3 provisioning rose 52% year-on-year. Are you going to provide aggressively in Q4 as properly?
We have been aggressive in generating Covid-connected more provisions, which we continue to do. But I do not consider it will be substantial in Q4 due to the fact we would have currently offered for the complete book in the final 4 quarters. At the starting of the year, we had estimated credit expense to be 2.8%. We must be capable to restrict it to about 2.5%.
Bond yields have began to harden. To what extent has your borrowing expense been impacted? How a great deal of a rise in expenses will you be capable to pass on to your clients?
Right now, we are not witnessing any hardening in our borrowing expenses due to the fact we are not undertaking any quick-term borrowing. But just about every year in March, some quantity of hardening takes place so it is absolutely nothing new. Being in a niche segment, we will be capable to pass on any raise if it takes place. We are pretty confident that we will be capable to borrow at decrease prices.