Ujjivan has the highest capital adequacy ratio of 28.3%. We are strong in terms of portfolio quality, governance and management.
By Hariprasad Radhakrishnan
The Covid-19 crisis is a good opportunity for businesses to plan for the future, as a lot of business models and customer behaviour are expected to change in the post-crisis scenario, says Nitin Chugh, MD and CEO, Ujjivan Small Finance Bank. In an interview with Hariprasad Radhakrishnan, Chugh said that the bank has adopted an opt-out repayment moratorium policy for its microbanking customers as they would need it the most, while for others, it has chosen an opt-in policy. Excerpts:
How do you think the lockdown would affect the asset quality of your microfinance book? What has been the impact on your rural borrowers?
Borrowers have been affected everywhere, and not just the rural borrowers. However, in our case, most of our borrowers run their own businesses, while a very small proportion of borrowers are dependent on their daily earnings. As and when the lockdown is over, the businesses should be able to get back on track faster than people who are dependent on daily wages. It is hard to say how they are going to be impacted. Considering that we have had a well-run book all this time, I think we will be better off and well-prepared.
Have your repayments been affected so far?
We had to stop our microfinance repayments a day before the lockdown was announced. On March 23 itself, our field operations were stopped. There is a very small proportion that comes through digital repayments. For all practical purposes, on micro-banking, there are no repayments right now. In any case, the loans are under moratorium.
How is Ujjivan rolling out the moratorium to its borrowers?
For March, most payments had already come. The recovery is due for April and May, and for those who have not repaid in March. For microbanking, we have extended it for everybody as they would need it the most. For all the other businesses, the offer is for all, but the customers have to make a request. We are reaching out to customers, and some of them are contacting us. We are taking these requests from customers who are in need, and make the changes in the system. For microbanking, it is opt-out, but all other customers have to opt-in for the moratorium.
What is the bank’s strategy to handle the crisis?
Our strategy is to ensure the well-being of our employees and customers at this time. We have put in a set of empowered teams in place. We are making a lot of outreach to our customers, and offered them free doctor consultations to check on any kind of symptoms nearly two weeks ago. Our senior management and HR team are checking on our employees’ well-being. Meanwhile, our branches are operational with very limited staff. Business continuity plan is functional, and ATMs are functional. We are also in touch with the deposit side of our customers. We encourage our customers to use digital channels. This time is a good opportunity for us to plan for a different way of running our businesses in the future, because a lot of things will change after this. We will see a lot of changes in business models and customer behaviour. We have to be better prepared for the post-crisis scenario.
When do you expect disbursements to pick up?
It is too early to say right now. If I have to give top-up loans to my repeat customers, it would not require a face-to-face interaction, and a phone interaction may be good enough. Maybe, they can be restored faster. If it is a new customer, a face-to-face interaction will be required. A field visit is required for loan against property or a business loan, which is not happening anytime soon. We will see how it plays out. Our level of preparedness will continue to be high.
Do you think there could be issues around deposit stability in small finance banks due to the crisis?
I don’t want to generalise, but small finance banks are as secure, stable and trustworthy as any other category of banks. If at all, we have seen these worries playing out in some of the larger private sector banks and, once in a while, in public sector banks also. Now, the RBI governor has assured that people should not have to worry about their deposits in any of the banks. Small finance banks are far more regulated than universal banks. There is no reason to think that there is lesser security there. Ujjivan has the highest capital adequacy ratio of 28.3%. We are strong in terms of portfolio quality, governance and management. Our customers believe in us. None of the customers were worried and did not come to us to ask that question. So, we don’t have any issue in deposits.