As the economies brace for negative growths, some signs of financial recovery have emerged in rural and semi-urban India. Thanks to better farm output, enquiries have started to come in for tractor and pre-owned vehicle loans, said Ramesh Iyer, Vice Chairman and Managing Director of Mahindra & Mahindra Financial Services.
Iyer said that about 7,000 customers walk into their 1,000-odd branches daily after the lockdown eased in the green and amber zones. "Most of them come for the repayment of loans at present. However, there are queries started for the tractor and pre-owned vehicle loans. The sentiments are turning positive in green and orange zones. The red zones will take a little longer time since there is still uncertainty on what's next," he told Business Today.
He believes that the sentiments will turn positive after the next round of crops if the harvest and farm cash flow improve. "The monsoon is expected to be average plus. From October festival season, overall sentiments will turn positive. Everybody is conserving cash at present and postponed the discretionary purchases. Post monsoon, the farmer community will start earning and the demand will pick up by the festival season," he added.
Mahindra Financial reported 66 per cent fall in consolidated net profit at Rs 239 crore in the March ended quarter. However, the total income increased by 8 per cent to Rs 3,140 crore. For covering the COVID-19 related contingencies, it provisioned Rs 681.16 crore as impairment loss in the quarter.
In April, the non-banking finance company (NBFC) had achieved 15 per cent collection efficiency. In May, the recoveries are upward to 35-40 per cent, said Iyer. The recovery in collection is primarily because of the better harvest. The demand for LCV, small pick-up vehicles and three-wheelers that carry goods are also expected to come back soon along with the better harvest. Iyer said that the segments that will take more time are passenger vehicle and commercial vehicle.
"The situation is different and abnormal at this time as we cannot compare the sales with last year same period. The government and RBI have made sufficient steps to make liquidity available to the NBFCs. But the business requirements are not going to be high. The debt will be mainly required only for large disbursements. The NBFCs need more money if the disbursements pick up in big time," said Iyer. He also said that the Mahindra Financial is sufficiently capitalised to repay the liabilities on time, even if the collections and disbursements are low.
He added that the government focuses in semi urban and rural infrastructure and mining will also help in improving infrastructure cash flow. "Both farm and infra cash flows together will definitely make it better for NBFC segment," he said.