Shriram Finance’s personal loan segment has been growing at a fast clip. However, Executive Vice Chairman Umesh Revankar tells Ajay Ramanathan that these loans are being given to only existing customers and the non-banking financial company plans to cap it at 5%. Excerpts:
Q. Recently, HSBC tripled the size of its syndicated overseas loan to your company to $400 million. How will you utilise these funds?
A. The money that has been raised will be drawn and utilised. You can raise up to $750 million each year through external commercial borrowing loans. That is the threshold and beyond that, you need to get an additional approval from Reserve Bank of India. We will be able to raise up to the limit for the full year.
Q. What is your borrowing target for this financial year?
A. It is the net increase in lending, which we want to do. That is the money to be freshly raised. Otherwise, the existing loans or limits will keep renewing. So, we may have to raise another Rs 20,000 crore in a year.
Q. Your personal loan segment has witnessed highest year-on-year growth in the September quarter. What is your outlook on this segment?
A. See personal loans are given to the existing customer base of Shriram. Imagine a person buys a two-wheeler and repays the loan. These customers will be offered a personal loan on the basis of their past track record. So, it is a past track record based eligibility criteria. In a personal loan, we do not ask customers as to what is the utilisation the loan. In a normal business loan, we look at application of the fund in a normal business loan. That is the only difference between these two loan segments. We would like personal loans to be within 5% of the overall portfolio.
Q. Your non-performing assets have been relatively higher in farm equipment. How do you plan to bring down bad loans in this segment?
A. While non-performing assets are higher in farm loans, the credit cost is very low. This is because this is a very safe business. We do not expect credit cost to be above normal. There may be some delay in payment if there are monsoon uncertainties. Normally, the credit costs in farm loan is quite good. We should be able to recover in the next cycle. We have branches everywhere. We normally recover bad loans ourselves and do not appoint any external agencies for this.
Q. In terms of products, what are the key focus areas for this financial year?
A. We will be giving equal weightage to all products. It is subject to change depending on the growth opportunities available. Currently, the opportunity in micro, small and medium-sized enterprises segment (MSME) looks quite large. But, we will be growing equally in commercial vehicle and passenger vehicle segment too.
Q. We are expecting some additional churn in the NBFC segment due to the entry of new players. What are your recruitment plans for this financial year?
A. We have recruited around 5,000 people at the entry level in this financial year. We do not plan to hire more staff this year.
Q. Your cost-to-income has risen on an annual basis. What is your guidance on this?
A. It is at around 26% and it will remain here. It will not go up further.