Collections and disbursals have been hit somewhat following demonetisation of high currency notes, says George Alexander Muthoot, managing director, Muthoot Group. However, Muthoot tells Shritama Bose, the shortage of cash would help drive digitisation. Excerpts:
Could you give us a sense of how collection efficiency has moved since November 8?
For the first two days after November 8, we had some difficulty. After that, it started getting better and better. If we compare the situation today to the days before demonetisation, we have raised 60% of our redemptions and 50% of our pre-demonetisation advance figures are already up.
That means, earlier if we were giving R100 worth of loans a day, today we are giving R50. Earlier if our collections were R100 a day, we are collecting R60 a day. We has started training customers one-and-a-half years back to use the online facility. Today, we have also started biometric fingerprint scanning for eKYC, which recognises Aadhaar numbers. Customers can get their loans credited through NEFT, RTGS, IMPS, etc in their loan account.
What about interest collection?
We are now back to 75-80% of our interest collection levels before demonetisation. That is because the interest is a very small part of the loan and people have liquid cash to pay. We are using that cash to give loans as well. So loans are happening, interest payments are also happening.
So, how soon will the business go back to normal?
I expect that the gold loan business should get back to good times maybe by the end of December or early January. That is because by then I expect people to have currency in their hand.
So will more digitisation help business grow?
Gold loan companies now also have an advantage vis-a-vis local moneylenders who do not offer the online mode of collections. It will take a long time for them to adapt to that. There is a lot of business that can come from that side to the organised sector once things stabilise. So the gold loan business should do better in the fourth quarter of this year.
Are disbursals being driven purely by recycling?
About 75% is through the online platforms. The remaining 25% is recycling from repayments. Even after everything, there will be people who will require cash.
So it is the people who are not availing loans online that account for the 50% drop in disbursals?
Yes, but they have to get educated now. Either that or they will have to get currency in hand.
What percentage of all your collections used to be in cash before November 8 and what is the number now?
Earlier, about 70% would be in cash and 30% would be in cheques, etc. Even if people move online, maybe 25-30% will still be in cash.
On November 21, the Reserve Bank of India issued a forbearance notification for loans less than R1 crore. There were concerns about borrowers seeing it as a repayment holiday. Misunderstanding of that sort is happening in cases where EMIs are involved. Because we don’t have EMIs, we don’t face those problems either. For us, even if somebody delays the interest payment by about one or two months, it doesn’t become an NPA because we have gold as 100% collateral with us.
Do you think demonetisation will affect your third-quarter numbers?
In terms of profitability, I don’t think it’s going to affect the third quarter numbers. In terms of growth, we may not see a big growth in the third quarter, but I am sure in the fourth quarter we should be able to recoup what we have lost in the third quarter. We won’t lose any AUMs; they will be in a steady state.