Covid stress manageable, focus now on growth: CreditAccess

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is planning to expand into more states, as the microfinance lender has become more confident about handling the stress arising out of the pandemic.

“Time has come to take a position for the future,” managing director Udaya Kumar Hebbar told ET in an interview. “How long can we hold back growth? The experience of the first wave and second wave (of the pandemic) gives us the confidence to navigate through future stress, if any.”

The country’s largest NBFC-MFI has started adding more branches after a pause for almost a year. It is looking for an entry into Punjab, Haryana, Himachal Pradesh and Uttarakhand where it has no presence yet.

The company on Sunday announced that its collection efficiency (for one EMI-basis – THIS MEANS without any arrear) improved to 92.5% in August from 81% in June. Repayment of loans hit a bottom of 65-70% for the microfinance sector in April and May following the brutal second wave of the Covid-19 pandemic.

The bounce back after the second wave has been sharper compared with the first one, Hebbar said.

The MFI’s potential risk of credit loss is however still at an elevated level. Portfolio at risk based on first-day default is 15.9% of its gross loan of Rs 11,155 crore. Although it came down from 30.6% in June and is improving month to month, it is higher than March’s 2.9%.

The lender wrote off Rs 275 crore of loans while another Rs 200 crore may need to be written off for the Covid-19 period, Hebbar said.

The incremental stress due to the second wave was 60% less than that of the first wave, he said.

Madura Micro Finance, which is now a part of CreditAccess Grameen, is facing higher stress than its owner. Madura’s portfolio at risk on first-day default is 19.5% of its gross loans of Rs 2,104 crore.

The pandemic has pushed an estimated 230 million Indians into poverty during the past one year with rural poverty being increased by 15 percentage points, according to a report by Azim Premji University.

“Rural capital formation is more needed in this vulnerable situation,” Hebbar said.

The MFI opened 103 branches in the last two months, increasing the tally to 1,067. It is going to add 30-40 more. These are mostly in Gujarat, Rajasthan and Uttar Pradesh.

These branches are being opened in districts which are contiguous to the districts where the lender already has a presence.

Hebbar said with an around 33% capital adequacy, the MFI is well placed for the next 18 months or so and doesn’t need capital infusion during this time.

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Source: Covid stress manageable, focus now on growth: CreditAccess

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