RBI expands loan limit for microfinance units, a direct beneficiary of which are SE Investments. Speaking to CNBC-TV18, MD Sunil Agarwal said credit growth in FY16 is expected to be around 30-40 percent due to RBI policy boost. Prior to the RBI move, the company was expecting a normal growth of 15 percent.
Below is verbatim transcript of the interview:
Q: How much of a positive is the RBI’s latest policy where they are tweaking the borrowing limit and enhancing it? What could be the potential credit growth at SE Investments now?
A: RBI policy has aimed to cater and serve a large number of population which is desperately looking to companies like us for their credit needs. Now the basic increase in the threshold limit per borrow from Rs 50,000 to Rs 1,00,000 makes the existing customers of SE Investments to be served in a far better manner.
Over the year the inflation has taken its toll and Rs 50,000 loan limit was definitely on a lesser side and so, I expect at least 40 percent jump over the next few months in the loan portfolio of SE Investments subject to our tying up our borrowing limits with various financial institution.
Q: Are you saying that in FY16 the loan portfolio can go up by 30-40 percent because of this boost? Prior to that can you tell us what you were expecting so we can access the impact of this particular development?
A: We were expecting a normal growth of 15 percent prior to this because you see we have an exposure of almost 7.50 lakh customers. Identification of the credit worthy customer is also a big challenge to make sure that you don’t put your money at risk. So the same set of customer we have the track record we have been dealing with them for years together.Now SE is a 1992 incorporated entity which is 23 years and so, it is great for us that we will go and visit our old customers and will be able to serve them in a far better manner.
We have lost lot of customers because of their financial need and the RBI cap over the last few years. We will be definitely looking forward to serve them now and asking them to join us back.
Q: With an increased loan disbursal size and an increased access to market as well there is caveat, I mean there is increased risk as well. Could you give us sense of how the non-performing assets (NPAs) or the riskiness of these incremental assets would be like?
A: Over the years we have served two kinds of customers; one is the typically small loan customer which you can also call kind of a micro finance but the small loan customers are all unsecured loans.
We do not have collateral backup. We have seen that these small loan customers fair far better when it comes to repayment. They value their credentials. For them repayment is a moral responsibility.
Unfortunately, what we have seen corporate with, wherein we have securities also do not value any repayment obligations for them it is a business transaction and they do not mind their cheque getting bounced.
However, these small customers are very cautious. He is cautious that the neighbor right to next to him or his relative should not come to know that he is in default. He may come in case of a genuine problem and say this is my problem but he is definitely not trying to avoid out payments.
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