‘Will be a steady 25-30% YOY growth player’
Suryoday Small Finance Bank was in the news recently after reports emerged of its potential merger talks with a non-banking finance company. In a freewheeling chat, R BASKAR BABU, its managing director and chief executive officer, talks about its growth opportunities and business environment with Manojit Saha. Edited excerpts:
The media recently reported that Suryoday SFB is in talks with Clix Capital for a possible merger. What is the reason behind this move?
Like all institutions, we keep looking at growth possibilities. We will make all appropriate disclosures in total compliance. We always look for meaningful, solid, compliant opportunities – both organic and inorganic and will continue to do so.
WE ALWAYS LOOK FOR MEANINGFUL, SOLID, COMPLIANT OPPORTUNITIES — BOTH ORGANIC AND INORGANIC”
Will inducting a partner help you overcome foreseeable challenges?
There are no such challenges that would make us look for a partner.
At present, we cater to over 1.5 million households. The segment we operate in is essentially low-income households. We do not want collection efficiencies to get impacted. Whatever defaults have happened are on economic and health fronts. Customers will come back, given that loans are short-term for small amounts.
We are into inclusive finance (micro loans) and affordable home loans. We are now into micro home loans, which are small-ticket home loans of ~5-10 lakh. We are also into commercial vehicle finance, catering to midsized freight operators. On a standalone basis, there are quite a bit of organic opportunities. We have a high capital adequacy close to 52 per cent. On the growth front, we have been fairly guarded. We are not chasing crazy growth. Our business is at ~4,000 crore. We do not crave for opportunities through other means because we can grow organically. We are not looking at opportunities to overcome challenges.
Disbursements took a hit in the April-june quarter. What is the bank’s credit growth target for the full fiscal year?
In Q1, total disbursements were ~361 crore. Disbursements in July were equal to that of Q1's. We have not given any guidance. We will be a steady 25-30-per cent YOY growth player.
Collections were also impacted in Q1. Have they recovered?
On a one-equated monthly instalment basis, the collection in March was 85 per cent for inclusive finance (microfinance portfolio). It dropped to 67 per cent in June. It improved to 78 per cent in July. From June to July, we have seen positive momentum. We believe the robustness in collections will continue.
The bank’s gross non-performing asset (GNPA) ratio increased sharply during the pandemic year, which was 9.52 per cent at the end of June, compared to 2.82 per cent a year ago. Is the worst over for asset quality?
Once an account turns into an NPA, it continues to be classified NPA till the customer makes all the overdue payments and becomes current. The GNPA as on June was 9.52 per cent, but on a 90+ DPD (days past due) basis, it was only around 6 per cent. That is to say, only around 6 per cent of customers had dues for more than 90 days; the rest came back below 90 DPD. Since they have not become fully current, they continue to be classified GNPA. In the pre-pandemic days, this divergence was not much. The point to note is that not all GNPA customers are nonpaying customers - around one-third are less than 90 DPD. What gives us comfort is that customers are paying, even if they remain GNPA for three to four months. To that extent, the worst is over. In terms of numbers, the NPAS may not immediately come down since some of the 60+ DPD customers may become 90+ DPD before they make the movement towards becoming current again. One way is to look at the GNPA numbers. Another is the number of customers paying and those not paying. The number of customers who have paid either in July or August or both months is around 90 per cent.
Do you have a road map for applying for a universal bank licence?
According to norms, SFBS become eligible to apply for a universal bank licence after completing five years, which for us will be January 2022. Universal banks have certain advantages. There are activities they can do that an SFB cannot do. We have not taken any decision on the issue so far. Over time, it will be a natural progression for any SFB to look at a universal bank licence.