INTERVIEW| Demand for loans has come back, says Nitin Chugh, MD & CEO, Ujjivan SFB

Nitin Chugh, MD & CEO, Ujjivan SFB

Ujjivan Small Finance Bank restructured around Rs 571 crore of loans up to July under Resolution Framework 2.0, as around Rs 750-800 crore of loans might require restructuring in Q2, says MD & CEO Nitin Chugh. In an interview with Mithun Dasgupta, Chugh informs collection efficiency for every single state improved in July compared to June. However, Assam and Kerala are lagging behind. Excerpts:

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In the first quarter this fiscal, Ujjivan Small Finance Bank’s net interest income (NII) fell 16% year-on-year at Rs 384.40 crore. What are the reasons behind that?

The NII was lower because we had elevated levels of non-performing assets (NPAs) at 9.8% (gross NPA ratio). So, that book did not earn very much. The overall book was more or less at the same level, where there was around 2% de-growth. Thus, income earning on assets reduced.

What is the outlook for the NII for second quarter?

That is the hard one to predict right now. Our business is improving and collections have also improved to 93% (in July, against 78% in June). We will be able to actually come out with it only when we finish the quarter. But things are improving, so that gives us confidence to at least believe that Q2 will be better than the Q1. Only caveat is that we don’t get confronted with the third Covid wave. In Q1, we had worked under very restricted conditions on account of Covid second wave and lockdowns. In lockdowns, both collections and business are impacted. And, then for our segment of customers, a lot of face-to-face interactions are required. Thankfully, in the first quarter, we got 15 days of April and 15 days of June to recover.

Disbursements in the Q1 was up by around 180% year-on-year, while quarter-on-quarter there was a 69% fall…
In Q1FY21, there was nothing at all, absolutely no movement because of the prolonged sets of lockdowns. Last year, things had probably opened up in June and July. In our business, in microfinance segment, we largely deal with a lot of existing customers. In Q1FY21, because we were unable to move for almost the entire quarter due to restrictions, face-to-face interactions did not happen and we could not deal with those customers. There were loan moratorium also. When people avail moratorium they don’t want to take any new loans.

However, this time, since we got 15 days of April because of the continuing momentum from the Q4FY21, that sustained itself for sometime till the lockdowns came in place. And when the restrictions started to go away by June 15, then the momentum started to come back. Right now, demands for all kinds of loans have come back quite strongly. Disbursements fell on quarter-on-quarter basis because Q4FY21 had been a very good quarter for us.

Do you have loan exposure in Kerala? What is the collection efficiency for the state?

In Kerala, our loan portfolio is around Rs 214 crore, not a very large one. Kerala for us is not among the top five states in any case. Our top five states are Tamil Nadu, West Bengal, Karnataka, Maharashtra and Bihar. Every single state improved in July compared to June, Kerala has also improved. However, it is not comparable to some of the other states, it is lagging behind. At the end of June, collection efficiency in Kerala stood at 39%, and in July, it was 86%.

In Assam, has the collection efficiency improved?
In Assam, the collection efficiency was 41% in June, while in July, it was 59%. So, Assam is still lagging. Most of the lenders are at the similar kind of numbers in the state.

Up to July, what was the total amount of loans restructured under Resolution Framework 2.0?

We have restructured around Rs 571 crore of loans. In July, we restructured around Rs 501 crore, out of whichRs 480 crore is from microfinance.