The effect of the second wave of Covid is far widespread than that of the initially wave, when there was not a great deal effect in rural places and not a great deal loss of livelihoods and radical reduction in collection efficiency, observes Ujjivan Small Finance Bank MD & CEO Nitin Chugh. In an interviw with Mithun Dasgupta, Chugh says the bank will have to estimate how a great deal loan restructuring would be necessary for microfinance portfolio, going forward. Excerpts:
Ujjivan Small Finance Bank’s net profit for the fourth quarter last fiscal jumped 86.5% year-on-year. However, its total revenue and net interest revenue (NII) fell in the course of this quarter. What are the motives behind these decreases?
There is only one purpose. We had recognised the pro forma GNPAs as GNPAs just after the Supreme Court vacated the remain (on banks for classifying loans which have been common as on August 31, 2020, as non-performing assets). That led to the reversal of interest revenue on GNPAs or de-recognising of the revenue to the extent of about `75 crore. And, that led to reduction in revenue as nicely as reduction in net interest margin (NIM).
Going forward, how do you anticipate the interest revenue developing?
I believe as lengthy as the loan book continues to develop. Last fiscal we grew by 7%, but that was largely since of we began to push the companies only from the December onwards. We are now confident that due to the fact we have been in a position to develop the book by practically 11% quarter-on-quarter in the fourth quarter, as and when issues get normalised, which we are hoping will take place hopefully by the finish of the present quarter, then we ought to go back to rebuilding the companies and developing. So, the revenue will, hence, continue to develop as the book grows.
How a great deal provisions did you set aside towards Covid-connected dangers?
In Q3, we had taken the accelerated Covid provision of Rs 547 crore producing the aggregate provision to Rs 1,029 crore at the balance sheet level. From Rs 1,029 crore, we had written off Rs 74 crore in Q4 which is also the total create-off in the course of the year, that brings down the provisions level to Rs 955 crore. That is what we are holding even now. We have totally free provisions of Rs 172 crore, and the balance is offered on account level, which tends to make our provision coverage ratio (PCR) of 60%. We had made provision of Rs 25 crore on interest accrued on proforma GNPA in Q3, which got reversed post the Supreme Court order.
Amid the second wave of Covid, how do you see the asset top quality for the bank’s microfinance portfolio in the future?
The bank had made the upfront provisions due to the deterioration of the asset top quality that we saw in the last monetary year. Obviously, there is continuing pressure. A lot of our clients had not even recovered from the initially wave. This time about the infections retain spreading in rural places as a great deal as in the cities. So, the effect is far widespread than ever ahead of. Last time, we did not see a great deal effect in rural places, we did not see loss of livelihood and radical reduction in collection efficiency. But, it does look like that the second wave will likely get resolved in the next 30-45 days the way the circumstances are coming down now. The RBI has really timely announced a lot of measures, in particular for the modest finance banks. So, we have these framework offered to us to operate effectively and responsibly, in terms of restructuring, and so forth. We have a lot of expertise from the last monetary year. We do know that what type of issues will work for collections and disbursal. At the finish of March 2021, 96% of our microfinance clients have been paying, totally or partly. In April collection efficiency dropped to 88%. At the moment, everywhere across the nation, collections are reduce than April.
How a great deal undesirable loans did you create off for microfinance portfolio last fiscal? And, what is the outlook for restructuring, going forward?
For the entire year, we wrote off Rs 74 crore, and of that microfinance was about Rs 60 crore. All these accounts have been NPAs as of February. We did not do any restructuring in microfinance loans. We did minor restructuring in housing and SME loans, which have been much less than Rs 30 crore. This time about we will have to estimate how a great deal restructuring will be necessary for the microfinance loan and we are working on the offered policy frameworks.