CreditAccess Grameen to target affordable housing through co-lending model: CFO Balakrishna Kamath

CreditAccess Grameen

Bengaluru-based CreditAccess Grameen, India’s largest microfinance lender, will target affordable housing through the co-lending model, Balakrishna Kamath, Chief Financial Officer, told Moneycontrol in an interview on November 20.

"For co-lending, we could look at affordable housing. That is one plan we have. We have just launched the product. Going forward, we could look at a co-lending model with a bank," he said.

CreditAccess Grameen's net profit nearly doubled to Rs 347 crore in Q2FY24 -- a year-on-year (YoY) growth of 98.1 percent -- driven by higher loans.

The microfinance lender said its total income increased 53.2 percent to Rs 1,247.6 crore, boosted by a 49.6 percent jump in net interest income to Rs 772 crore.

"Our last acquisition was of Madura Microfinance, through which we gained market leadership in Tamil Nadu and we have already merged the company. Today, we are growing the book by almost Rs 5,000-6,000 crore every year," said Kamath.

The credit cost for CreditAccess would be in the range of 1.6-1.8 percent in financial year 2024, he said.

In the July-September 2023 results, CreditAccess Grameen said that the loan book rose 36 percent to Rs 22,488 crore, while the borrower base grew 21.2 percent to 46.03 lakh across 1,877 branches, and collection efficiency improved to 98.7 percent.

Gross NPAs fall steeply

Credit loss provisions declined 9 percent from Rs 105.4 crore to Rs 95.9 crore, during the reporting quarter and the total expected credit loss provisions stood at Rs 343.2 crore or 1.60 percent of the assets.

Gross NPAs declined steeply to 0.77 percent from 2.17 percent, and net NPAs fell to 0.24 percent from 0.77 percent. During the quarter, the lender wrote off loans to the tune of Rs 76.5 crore.

“On the asset side, our collection efficiency is around 98.7 percent, and we only have a GNPA of 0.77 percent and a net NPA of a mere 0.24 percent. We have also revised our annual guidance, looking at our good first-half performance with a return on assets (RoA) of 5.4-5.6 percent and return on equity (RoE) of 24-25 percent,” he said.

"On the AUM side, we have remained with our earlier guidance of 24-25 percent, which indicates that, this year, we would end up with an AUM of around Rs 26,000 crore," said Kamath.

MFIs play crucial role in terms of financial inclusion

Kamath pointed out that microfinance institutions (MFIs) are playing a crucial role in financial inclusion, especially in the rural segment. MFIs have a 60-65 percent presence in the rural market.

"It is not very easy for the government or for government bodies or even for public sector banks to have that kind of an outreach. So, we are expecting an increase in support in the days to come from the government," he added.

“After COVID-19, we had a very good recovery, and thereafter, our collection rate is around 98.7 percent as of today. This is very close to the pre-COVID level,” he said.

"So, we are back to normal, and good to say that our lending practices are very tight. We have multiple layers of checks. There is a limit-based credit offering. That means we give better range to people who have got more vintage with us and who have got a better credit record," the CFO of CreditAccess Grameen added.