Post-Covid revival! Collections improving for some players in micro loans segment

By: |
September 26, 2020 7:45 AM

“In the pre-Covid period, our bank had a collection efficiency of 98% in micro loans. I expect at the end of the third quarter, we would be able to attain this figure comfortably," Ghosh said.

Bandhan Bank, which has a substantial portfolio of micro loans, has seen an improvement in collection efficiency in micro-banking loan vertical in September compared to August.Bandhan Bank’s low CD ratio helped it ramp-up deposits quickly since converting into a bank in 2015, gaining market share from PSU banks.

Major players in the micro loans segment have so far been witnessing a higher or the same range of collection efficiencies in September compared with August, with agriculture and agri-allied sectors performing better, and both the rural and urban areas seeing further pick-up in economic activities.

Bandhan Bank, which has a substantial portfolio of micro loans, has seen an improvement in collection efficiency in micro-banking loan vertical in September compared to August.

“I had earlier predicted that in September our bank would attain 90% collection efficiency. As of now, we are on track. Collection efficiency is improving on a day-to-day basis,” MD and CEO Chandra Shekhar Ghosh told FE.

“In the pre-Covid period, our bank had a collection efficiency of 98% in micro loans. I expect at the end of the third quarter, we would be able to attain this figure comfortably,” Ghosh said.

According to Ghosh, major reasons for improvement in loan repayment in rural areas are that the agriculture and agri-allied sectors have been performing better and farmers are getting good prices for their produce.

And, in urban areas and metros, opening up of small businesses has ensured restoration of supply chains.

Bhubaneswar-based microfinance institution Annapurna Finance has seen ‘significant improvement’ in its collection efficiency in September compared to August.
“This is because agri and allied has been doing good. And economic activities have started opening up both in rural and urban areas,” said Dibyajyoti Pattanaik, director of Annapurna Finance.

Kuldip Maity, managing director of Kolkata-based Village Financial Services, said the collection efficiency was around 65-70% in August and it has so far increased to 85% in September.

“I expect our collection efficiency to reach the pre-Covid period of 99% by December,” Maity added.

Satin Creditcare Network said it has been witnessing ‘same range’ of collection efficiency this month compared to last month. HP Singh, chairman and MD, during the first quarter earning conference call, said, “With each passing month, we have been seeing an improvement trajectory in our collection efficiency, as majority of our borrowers are engaged in essential services, thus recoveries from them are expected to be much faster.”

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