Kolkata, January 26
Fincare Small Finance Bank, which has a majority of its business coming from the microfinance sector, expects growth rates in the industry to bounce back to pre-Covid levels by the end of this fiscal, on the back of steady demand and improvement in collection efficiency.
According to Rajeev Yadav, Managing Director and Chief Executive Officer, Fincare, small finance banks (SFBs) were growing by nearly 35-40 per cent during pre-Covid period. However, growth rates slowed down to close to 15-25 per cent during the last two-to-three years due to Covid induced slowdown. But there are signs of good growth in disbursements in Q3 of current fiscal as customers are looking confident now, with Covid fears largely left behind and a huge pent up demand.
Signs of improvement
“At the overall level we should be back to pre-Covid levels. Q1 and Q2 was more of a transition period but in Q3 we are seeing signs of improvement. Customers are now looking confident that Covid fears are behind, there is pent up demand and given the inherent strength of Indian economy we expect a faster growth,” Yadav told businessline on the sidelines of the inauguration of its first branch in the city recently.
Collection efficiency of most MFIs and institutions lending to the sector had taken a hit during the past three years due to the pandemic induced slowdown which affected the repayment capacity of borrowers. However, collection efficiency, which has been steadily improving, has reached near pre-Covid levels in Q3 of this fiscal.
“When we start FY24, we should start with a clean balance sheet,” he said indicating that the collection efficiency should bounce back to pre-pandemic levels by the end of this fiscal.
Microfinance loans account for nearly 76 per cent of its total loan book while the remaining 24 per cent comes from mortgages, home loan and gold loans. The share of microfinance is expected to come down gradually as other loan segments will grow in the coming days. However, it will still continue to account for a major share in the total loan book.
“We are specialised in JLG lending and it is one of our largest product. While the mix of microfinance in the total loan book may come down to below 50 per cent in the next couple of years, it will still continue to a major share of our loan book,” he said.