Microfinance biz to regain normalcy in 3-4 weeks: Mannappuram

Demonetisation will turn out to be a positive for non-banking finance companies (NBFCs) in the medium to long term and normalcy with respect to gold loans should come back in the next 10 days, says VP Nandakumar, MD and CEO of Mannappuram General Finance.

Speaking to CNBC-TV18 he said that microfinance business will take around 3-4 weeks to return to normalcy and the gold loan business may not see a huge impact due to demonetisation.Below is the verbatim transcript of VP Nandakumar's interview to Latha Venkatesh, Sonia Shenoy and Anuj Singhal on CNBC-TV18.Latha: In what ways can Manappuram get impacted? Do you expect immediately people will have an inability to repay?A: If the medium-term to long-term, these demonetisation will turn positive on non-banking financial companies (NBFCs).As far as we are concerned, all our payments, loan disbursements above one lakh is through bank account only. This constitutes around 50 percent of our disbursals. Even the other disbursals we have come out with new product of online gold loan, where we disburse through the bank accounts.So in gold loan, around two-third of our business has come to the normal stage and online repayments have reached the level -- out of the total we are getting around two-third. It is steadily improving.In another ten days, hopefully we will reach to almost normalcy in gold loan.Anuj: What is the longer-term impact? One point of view is that gold will now become safer so[ in that case. Gold finance companies have become much safer in terms of their businesses, would that be the right way to think from the longer-term point of view.A: The gold loan business may not be impacted. We are serving the bottom of the pyramid. Anyway they wanted the cash and they have the gold -- our average ticket size is around Rs 30,000 and the average pledge one has is around 15-20 grams. So that segment I don’t see will have a medium-term to long-term impact. Some short-term impact for a couple of months could be there, which cannot be ruled out. Other than that, things will go positive for the gold loan business as such.Sonia: What is the percentage of disbursements currently that you get through cash and how much could your disbursements get impacted in the next one-two quarters?A: The business is around 60 percent of the normal business. It was 25 percent  which was steadily increasing. Hopefully, we will reach normalcy in another two-three weeks time. Both disbursal as well as collections. So in gold loan industry, I think that the impact could be minimal and medium-term to long-term it will turn very positive because gold loan business is normally a high opex business. So when the cash transactions are reduced, the impact on the gold loan business will be positive.Latha: How much do you do by way of microfinance? Do you have any microfinance related lending?A: We have a subsidiary called Asirvad Microfinance where the book growth of microfinance is around 12 percent of the total book. So microfinance collections are yet to be improved. MFI is taking all efforts to see how these problems are mitigated but nothing has come but the microfinance industry will find some base to collect cash and disburse. So they take some more time maybe three-four weeks time to get normalised.Latha: Do you do any NBFC kind of business?A: We do that. We are into home finance, into affordable housing. Our average ticket size is around Rs 15 lakhs. So through a subsidiary called Manappuram Home Finance Ltd. So book is around Rs 250 crore.Latha: Not loan for small businesses?A: We have a small book around Rs 100 crore. We have another lending financing commercial vehicle.Sonia: Any defaults there in commercial vehicle sector do you expect to see?A: We are there. The financing mainly is in LCVs.Sonia: Are you expecting to see any kind of defaults in the commercial vehicle space because of the demonetisation scheme?A: some slowdown there maybe one-two months because if the general economy is slowing down. No business can escape completely. What we are trying to do is to minimize the impact.