Banks are working with auto dealers who have utilised all their inventory funding limits, PK Gupta, MD – retail and digital banking, State Bank of India says.
Banks are working with auto dealers who have utilised all their inventory funding limits, PK Gupta, MD – retail and digital banking, State Bank of India, tells Shritama Bose. Even as QR codes become a familiar sight at stores, card-based payments will continue to hold their own, he adds. Edited excerpts:
Even retail growth, which has been driving loan growth for banks, seems to be slowing down now, along with the other segments. Why is that happening?
In retail, we have essentially seen less growth in the auto sector, but we have not seen much of a slowdown in the personal, unsecured loans. Even in education loans, I think we are doing alright.
Some auto dealers are claiming that banks have been denying them financing and asking them for 100% collateral in some cases. Dealerships are also known to be shutting down.
I think banks have done inventory funding for the dealers also. Our experience is, because of the slowdown, whatever limits banks had for this inventory funding, they have been fully utilised. They have not been able to generally repay on the due dates, typically within the credit period for which this inventory funding is done. Some of them are facing difficulties in their ability to liquidate at the end of the credit period all the inventory funding that has been done for their inventories. So we are working with each one of the dealers and trying to see what can be extended to them from the bank’s side.
Is the collateral requirement being raised?
Ultimately, the bank will have to see how it can strengthen its liquidity position. As I said, we are talking to each of the dealers and seeing that if they need more financing when their existing limits have been used, that is when banks can ask for some collateral to strengthen their position.
You bought NBFC loan pools worth around Rs 20,000 crore in FY19. What is the plan for FY20 and how are the existing pools performing?
Existing pools are performing alright. As a bank, we can still buy, but it will depend on the ability of some of these NBFCs to offer the pools also. Quite a few of them were in need of funds when they offered these pools.
Then, these pools need seasoning also. At that time, they didn’t have one-year seasoned pools, so RBI reduced the requirement to six-month seasoned pools. So I believe quite a few of them have already offloaded some of those pools. The volumes this year are probably going to be much lower because they are not generating a lot of new pools.
Some banks have made contingency provisions because they expect agri slippages in Q1. Anything you are expecting?
In agriculture, we are facing stress only in one or two states, not across the country. I cannot name the states, but they are basically the ones where debt waivers were announced and the farmers have still not come forward to get their loans restructured. For claiming the waiver money, the farmers have to pay some money. The challenge we are facing is those farmers are not coming forward and claiming their portion of waiver amount from the government.
Over the years, banks have put in place a large POS infrastructure. Lately, a few fintechs have been installing QR codes at offline stores. Do you think they might begin to take some share away from cards?
They could, but again, if you look at it, for India as a country, the number of POS machines is still not enough. Card usage is very prevalent. Everybody has a debit card, but not everyone has a smartphone yet. That is the reason why we think that there is still some room for even the POS machines to go up a little. I don’t think POS machines are going to go away, but yes, over a period of time, the use of QR codes and UPI for payments will increase.
Do banks have a role in QR deployment? Paytm is now itself a bank and PhonePe has just the one bank partner.
The problem that banks have had is with cashbacks. The model that these fintechs are following involves very heavy cashbacks. We think that the cashback model is not sustainable. You can have small cashbacks to begin with, but on a longer-term basis, this model does not work.