Currency ban to keep NBFCs under pressure for some time: M&M Fin

These are good times but difficult times, he said.Below is the verbatim transcript of Ramesh Iyer's interview to Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Latha: Non-banking financial companies (NBFC) stocks are getting pummelled today for fear that there is going to be a lot of near-term dislocation in SMEs, what are you feeling in from the ground?A: I think clearly there are times where you don’t have ready solutions and everyone speculates, everyone has their own take of what is likely to happen.What we are doing is we are getting very closer to customers engaging with them understanding what is the situation. In the sense that, we are working with earn and pay customers. So we are not working with the ones who already have enough cash flow to pay for our dues from past earnings. Therefore, for us it is going to be a response of being close to them.Yes, they will go through this pain for some more time until the real money is back in the system in the form of currency notes because who are we financing? At the end of the day, individual customers running vehicles, carrying passengers up and down, so is their business going to be temporarily impacted for a couple of days? We see that happen. Farmers community possibly with crops in hand will wait for how their cash flows come in. These are real times where you have to be very close to customer and not take some knee-jerk reaction sitting thousands of miles away from them.It will also possibly spell out very clearly, the ones, who had money and did not pay you -- how are they going to respond and therefore will they return their collateral. So good times but difficult times. We will have to live through.Sonia: Are you expecting to see any kind of delays in terms of repayments or even a slowdowns in terms of overall disbursements because that is the sense we got from the couple of other NBFCs I spoke to recently?A: My answer would be yes because even if somebody had money, they are going to wait and see how the whole thing pans out before they can start investing or consuming. So, we are typically a society which would like to store for future. We don’t want to live today and live the future to someone else's imagination.In a very simple example however silly, you would put notices in the society, no water tomorrow, all of us fill up every vessel at home.Latha: What is the expectation, you were standing at some 11 percent non-performing loans (NPLs), how much might it rise to only in this quarter or perhaps next quarter as well?A: Difficult judgement, we still have time upto December 30 in terms of quarter ending is concerned. At least our customers aren’t saying that they won't be able to pay. What they are going through also is an administrative even if somebody wants to go to the bank -- why were they not going to the bank and paying us cash. If you look at it, it is just that we shrunk the distance between a customer and a bank being a branch in between. Therefore, they found it so administratively easy to come and leave the money with us rather than going to the banks and depositing. So it is not for reasons of they cannot deposit the money, it is reasons of administrative convenience.That convenience is not anyway taken out, it is still getting difficult. So we will have situations where overdues will go up, customers will come and discuss, negotiate, some may even return collaterals, some may not even buy vehicle. But it is just couple of days that we have crossed through this and it will be completely wrong if we say that we have assessed every possible situation and we know the answers for every problem.But the fact is these levels are pretty high everyone is on the street meeting customer, customers are undecided on what is next for them so to that extent, I would think it is a situation where we need to be very close to customers, spend a lot of time with them, understand work with them and it is quite possible at the end of it maybe there are going to be delays which will spill over to the next because at the end of the day all these people have to earn the money to pay to farmers with crops. Unless that crop is sold and the money comes in, it is not going to be easy for them to pay. So even if there are going to be any rise in numbers, I would think there could be temporary but they would get corrected as things change.We don’t see this as a crack in the fundamental but we do definitely see it as temporary pressure that we will have to live with.