ESAF has more than 96% of its exposure in the micro segment with the average ticket size of the loan being Rs 33,000.
In just two years of operation, ESAF Small Finance Bank became a scheduled bank from December 2018 and also got Sebi approval in March 2020 to raise capital through an initial public offering. Managing director and chief executive officer K Paul Thomas tells Rajesh Ravi on the concerns and consequential problems due to the lockdown. Edited excerpts:
What is ESAF’s experience with branch banking during the lockdown period? Have you seen a significant change in net banking or ATM transactions?
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Most of our branches are open and functioning but the footfall is less than 10 people per day. We have noticed that customers are only doing the bare minimum banking. Our ATM transactions for the period is 3.12 lakh with a disbursement of Rs 73 crore, which is also on the lower side. But we have seen the gold loan product being used a lot for emergency purpose. On a single day, we saw disbursement of Rs 59 lakh in the gold loan section.
Do you expect an increase in demand for credit after the lockdown period?
We expect credit offtake to increase in the SME segment after the forty-day lockdown period. We estimate that the micro and MSME sector will need funds for re-starting their establishments and also need working capital. Our strength and focus is the micro segment.
Many people and establishments are likely to suffer due to decline in income during the lockdown. Do you expect delinquencies and NPAs to increase significantly?
ESAF has more than 96% of its exposure in the micro segment with the average ticket size of the loan being Rs 33,000. We have given a moratorium of three months till May to all our customers and are constantly in touch with them through our banking correspondents. The customers are confident that they can repay the loan within some time after the moratorium. We have past experience in dealing with such calamities like the flood of 2018 and don’t see any problem. However, we estimate a little more delay in the MSME segment as they may take more time to come back to normalcy. We don’t have much exposure in the corporate sector as our focus is mostly in the retail sector.
Are you thinking of a new product to help them tide over the current situation?
We have a new product for the small traders — a micro business loan — and are expanding it through the traders association. For our existing customers, we are giving a ‘Covid Care Loan’ of Rs 30,000 with a four months moratorium. This is a pre-approved loan and during the floods, we had disbursed Rs 89 crore to our customers who were in a similar situation.
NRI remittance is a major source of fund for most of the Kerala-based banks. Do you see any shift in the remittance given the pandemic and other problems in West Asia?
We do expect a disruption in the short-term,but in the long-term, we don’t see much problem. Our expatriates are very vital for the economy of West Asia and I think we will overcome the problems.
What is your outlook on the economy post-Covid?
My observation is that the short-term impact will be severe in all segments. The recover will take a minimum of six months. The small segment is likely to recover faster. I think India has more opportunities and will recover in 18-24 months. I expect the automobile and telecom sectors to do better post-Covid. Kerala may again significantly bounce back due to its better handling of the situation.
ESAF received Sebi approval for an IPO recently. Have you taken any decision?
We have not taken any decision on the IPO so far. We received approval in March and we have one-year time to go to the market. We may take a little more time for a public issue.