Poor financially more vigilant, no need of moratorium

With the pace of economic activity increasing, loan installments have started coming in fast with Small Finance Bank, ie Small Finance Bank (SFB). Most of the people taking loans from these banks come from the lowest strata of the society economically. They are paying the loan themselves so that even if the amount is in hand, the bad debt does not increase.

In today's episode of 'Unlocked BFSI 2.0', the financial webinar series of Business Standard, the heads of the country's top SFBs were quite confident about their business. However, repayment of about 90 percent of the loan taken from them was halted since March. But by July, half of the loan repayment had started and these banks are hopeful that after the end of the moratorium in August, their business will be done as before and installments will start coming. It is a different matter that for the next several months, the emphasis of these banks will also be on recovering the installments.

The webinar included Alok Mishra, chief executive officer of Microfinance Institutions Network (Mfin), Nitin Chugh, head of Ujjivan SFB, PN Vasudevan, head of Iquitos SFB, Ajay Kanwal, head of Jan SFB, Sanjay Agarwal, head of AU Small Finance Bank, and R Suryodaya, chief of SFB. Bhaskar Babu came as a panelist. Everyone said that during this time, the best thing was that despite the banks saying, people are not ready to take more loans. This shows how vigilant and disciplined the poor section of the debt is. SFBs are also not pressurizing their borrowers.

Vasudevan said, "At this time customers need support, they should not be under pressure to repay debt." Our relationship is not only for July-August. Our customers will stay with us for three, four, five years. If the client's earnings have stopped, I would love to talk with him and share his grief. After the lockdown started, about 90 percent of the debt of Equitas Small Finance Bank of Vasudevan came under the Moratorium. But now only 43 percent of the debt remains on the moratorium.

However, everyone believed that there is no need to increase the moratorium. Bhaskar Babu of Suryoday Small Finance Bank said, "The need for a moratorium is no longer there." It is enough as it is done. However, these banks also shed a lot of sweat in convincing the people that the moratorium is not debt-free and the facility will end in August.

Mini CEO Mishra complained that people with locally vested interests and mischievous elements were misleading people by saying that the debt would be forgiven if the installment was not repaid. Thankfully, till now it has not been made a political issue. Chugh, the head of life, said that the matter is no longer of the city or the village. He who has work and earnings is coming to repay the debt. Kanwal of Jan Small Finance Bank is looking to accelerate economic activities as the increase in debt will also speed up the pace. However, he believes that 1 in 100 will make excuses to avoid debt repayment. The good thing for small finance banks is that they are not struggling with the cash crunch. Even after the interest rate on deposits is low, people are flocking to deposit money. Although these banks are not even around full commercial banks, they are also increasing the use of technology to speed up debt collection and benefit customers.