Suryoday Small Finance Bank, which is in the process of filing its Draft Red Herring Prospectus (DHRP) for its forthcoming IPO, saw 35 per cent of its customers opting for moratorium by the end of August 2020 even as its monthly collections (of loan repayments) languished around 65 per cent of the pre-COVID levels.
R Baskar Babu, Co-founder and CEO, Suryoday Small Finance Bank, says the number of customers opting for moratorium has changed over the months. "The moratorium was around 80 per cent, to begin with, which dropped to 35 per cent in August, the last month of it. It was 45 per cent in the previous month."
When the moratorium was announced (in April this year), he says, they did not want to be seen as pressurising or following up with the customers for payment. "We assumed that the customers who did not pay were opting for moratorium."
"Across the industry, there was this understanding that whoever is not paying, will be treated as having opted for moratorium. Often an opt-out was the choice," he says.
Small finance banks, which according to the Reserve Bank of India, account for 17 per cent of the microfinance loan portfolio, are bearing the brunt of the COVID-19 pandemic as many of them saw their monthly collections (of loan repayments) falling 85-90 per cent in April. And even if collections have gone back to 65-75 per cent of the pre-COVID levels, there has been a sharp jump in gross NPA levels.
Suryoday may not be an exception as Baskar Babu says: "We virtually started with almost zero (net) to 0.5 per cent NPA. So even if 5 per cent of the customers are not paying for the next three months, the NPA would look 5 per cent from a meagre 0.5 per cent."
As on 31 March 2020, Suryoday had a gross NPA of 2.8 per cent and net NPA at 0.6 per cent. Suryoday is largely a micro-finance focused small finance bank with 80 per cent of its loan portfolio MFI loans and the rest retail loans. Suryoday Small Finance Bank had a gross loan portfolio of Rs 3,711 crore and deposits of Rs 2,849 crore as of March 31, 2020.
Suryoday Small Finance Bank, according to its CEO, saw the collections in April going down to 15 per cent of the pre-COVID levels, which slowly picked up and stood around 65 per cent in August. Its loan disbursements have also fallen sharply as he expects it to be around 50 per cent of the pre-COVID levels by the end of September.
Though rural customers account for only 30-40 per cent of its portfolio, Baskar Babu says resilience in the rural sector contributed to pick-up in both collection and loan disbursal.
"Rural segment seems to have displayed tremendous resilience probably because the lockdown impact was much lower and agricultural activities continued. The reverse migration, which happened (in April and May), meant that people went back with some money in hands. I don't have any scientific data to validate that, but the fact is that they did go back with whatever savings they had," he says.