What has been the impact of demonetisation on loan applications?
The top four businesses for us are the two-wheeler business, consumer electronics business, mobile products financing business and lifestyle financing businesses. Our B2B businesses have close to 37,000 points of sale, where clients walk in and enquire about products they have to purchase. This is highly seasonal in nature. Between November 1 and 30, on an aggregate basis, the total number of log-ins, or applications, was close to 680,000, compared with 570,000 last year, which marks around 20% jump. But one has to look at it in the context that this quarter normally sees a 40-57% growth. The numbers tell you how inquiries and applications from customers dropped. I must clarify that this doesn’t represent the quarter. It represents only the month of November – for a period of 30 days post demonetisation.
Has it hit growth in your consumer durables finance portfolio?
In the guidance, we had told investors that based on the portfolio performance, we’ve taken a decision to cut 18% of the (consumer durables finance) business.
If we had not cut 18% of this business, the growth would look like 25-26% versus 10% that you are seeing. In a way, there is a 6-8% impact we would have seen, if not for our credit action. The average book here is of five to six months. We believe that good growth here will be back from February-March onwards.
What has been the impact on asset reconstruction-based businesses?
Here the impact has been a lot less than on discretionary B2B businesses. The majority impact we’ve seen is in loan against property (LAP). It’s our view at this point in time that the luxury end of the real estate business market will see significant slowdown in velocity, and as a result, we have cut maximum exposure by cities in our portfolios to go more retail, more distributive rather than concentrated. So, you see a 30% drop on a 30-day basis as a result of demonetisation, but 6-7% is the impact of demonetisation, 20-24% is the impact of our action, as a company, to cut down larger exposures.
What will be the short- and long-term impact on your operating costs?
Fundamentally, outside of credit card, which doesn’t present installments and is a billing-based product, we present by far the largest number of instruments in the retail loan business. There are 7 million customers we bank in the non-two-wheeler category and two-wheeler has another 700,000 customers. In the consumer side of the business – I am talking about non-two-wheeler – we’ve had a view that we don’t want to reach a tipping point where just the cost of collections becomes so large that we could either see economy being compromised or loan losses turning out to be larger than the estimates just because of our inability to collect.
We started to invest in what we call digital channels five years ago. You see 5.6% of customers paid online even in October. That has accelerated to 12%. Where we are heading is the mobile wallets and debit card swipes. We had 1,200 dongles, we now have 7,000 dongles. I’m not so sure of that behaviour (use of digital channels) in the two-wheeler side of the business as yet, as we’ve seen it play out in the urban business and the mass affluent segment unlike in rural un-banked markets.