Calcutta, January 26
Fincare Small Finance Bank, which has most of its business coming from the microfinance sector, expects growth rates in the industry to recover to pre-Covid levels by the end of this fiscal year, thanks to steady demand and improvement in collection efficiency. .
According to Rajeev Yadav, Managing Director and CEO of Fincare, Small Financial Banks (SFBs) grew by almost 35-40 percent during the pre-COVID-19 period. However, growth rates have slowed to close to 15-25 percent over the past two to three years due to the Covid-induced slowdown. But there are signs of good growth in outlays in the third quarter of the current fiscal year, as clients look confident now, with Covid fears largely overcome and strong demand pent-up.
signs of improvement
“Overall, we should be back to pre-Covid levels. The first and second quarters were more of a transition period, but in the third quarter we are seeing signs of improvement. Customers are now confident that the Covid fears are behind us, there is pent-up demand, and given the inherent strength of the Indian economy, we expect faster growth,” Yadav said. Line of business on the sidelines of the inauguration of its first branch in the city recently.
The collection efficiency of most MFIs and institutions that provide loans to the sector suffered during the last three years due to the slowdown induced by the pandemic that affected the repayment capacity of borrowers. However, collection efficiency, which has been steadily improving, has reached near pre-COVID-19 levels in the third quarter of this fiscal year.
“When we start fiscal year 24, we should start with a clean balance sheet,” he said, noting that collection efficiency should return to pre-pandemic levels by the end of this fiscal year.
Microfinance loans make up nearly 76 percent of its total loan book, while the remaining 24 percent comes from mortgages, home loans, and gold loans. Microfinance’s share is expected to gradually decline as other lending segments grow in the coming days. However, it will continue to represent an important part of the total loan portfolio.
“We are specialized in JLG loans and it is one of our most important products. While the microfinance mix in the total loan book may fall below 50 percent in the next two years, it will continue to be a significant part of our loan book,” he said.
