We face default risk if demonetisation woes prolong: Ujjivan

Speaking to CNBC-TV18 Samit Ghosh, CEO & MD of Ujjivan Financial Services, said that they have deferred repayment schedules for his customers following the demonetisation move by the government.

Customers are very cooperative, he maintained, adding that customers won’t default. “Given this unusual situation we have deferred repayments by a week and hopefully customers understand fully.”

However, he did say that if this situation prolongs for a long time, they risk a default. They have taken it up with the Ministry of Finance to accept old notes. All these are old documents and we have the KYC of all our customers, he said. These are all legitimate transactions. If this process is delayed further, we need forbearance from Finance Ministry and the RBI, he added.Below is the transcript of Samit Ghosh’s interview to Sumaira Abidi and Mangalam Maloo on CNBC-TV18.Sumaira: Before we get to your earnings we want to understand from you, since you have the pulse of the people, what is the impact of the demonetization of the high currency notes as you see it? What is the kind of impact that your company might feel?A: Most of the repayments are in cash for the entire microfinance industry and they are done in denominations of Rs 1,000 and Rs 500 notes. So, most of us have deferred the repayment or rescheduled it or postponed it by one week. What was due this week and we have also stopped our cash disbursements. So, there will be a temporary dislocation in terms of repayments and disbursements.We expect by next week -- when the new notes are in place -- that slowly will get back to normal. So, so far we have been assisting our customers, telling them how to handle this situation, where to go to get their notes replaced, etc. So, far it has been very positive from the customer and we are hoping to get back to normal next week. In the mean time, the microfinance institution, which is our association has also taken this up with the Reserve Bank of India (RBI) and with the ministry of finance to see if there could be some way where these customers could repay with old notes if this whole process is extended.Mangalam: You spoke about your repayments being in cash. So, what proportion of this delay in repayments stands to be at risk of default?A: Customers are very generally very cooperative. So, it is not that they are going to go into default. Given this unusual situation, we have deferred it by a week and hopefully, customers understand fully and since we are not trying to force them into doing something, they will come back and repay it after a week.However, if this whole thing prolongs for a long time then we risk a default and that is why we have taken this up with the RBI and with the Ministry of Finance to see if we could accept the old notes because all these are documented transactions, we have repayment schedules, we have the KYC of all our customers etc. So, these are all legitimate transactions. So, if this whole process gets delayed further then we would need some kind of forbearance from the Ministry of Finance and RBI.For full discussion, watch accompanying video...