Restriction on lending and collection due to covid-19.
There are currently over 4 lakh active Covid-19 cases in the state, with a test positivity rate of over 25%. Many villages and municipal wards with a test positivity rate of more than 30% have been designated as containment zones and are under complete lockdown. Last Thursday, the state government declared a lockdown from May 8 to May 16. During the lockdown, the government has also limited physical loan recovery.
Kerala’s lending and collection operations are likely to suffer as a result of the state government’s decision to limit service to just three days per week in order to combat an increase in Covid cases. Last Thursday, the state government declared a lockdown from May 8 to May 16. During the lockdown, the government has also limited physical loan recovery.
There are currently over 4 lakh active Covid-19 cases in the state, with a test positivity rate of over 25%. Many villages and municipal wards with a test positivity rate of more than 30% have been designated as containment zones and are under full lockdown. According to Mathew Muthoottu, managing director of Muthoot Mini Financers (MMFL), the Kerala government’s order prohibiting recoveries during the lockdown would have an effect on all banks and NBFCs’ cash-based recoveries.
However, the most recent reforms do not prevent online purchases. As per Kerala government regulations, our branches are open and conducting business with a small number of employees on alternate days. Customers would find it difficult to pay back the loan within the specified time frame. We encourage customers to use our digital channels to satisfy their requirements, keeping in mind their inconvenience,” he added.
According to a top official from a private sector bank, the restrictions imposed have reduced branch productivity.
“Owing to the limitations, our gold loan disbursement is likely to be delayed. People use gold loans for emergencies, and if banks and NBFCs are closed, they will turn to unorganised players. On the collection side, we foresee little effect because people who are aware of their credit history and concerned about it will make an effort to pay on time.
Customers are gradually using digital applications to conduct transactions, according to VP Nandakumar, MD and CEO of Manappuram Finance.
“In microfinance, we’ve noticed that consumers are gradually using digital platforms to make payments directly from their bank accounts, even if collection centre meetings are temporarily disrupted. The digital mode now accounts for a significant portion of our collections. For example, in our gold loans portfolio, the online gold loan (OGL) platform has been embraced by the majority of our customers,” he added.
“The availability of cash flow and logistical challenges faced in the physical collection are the main factors affecting collection quality. “However, our digital collections are now operational, and customers can pay their loans digitally,” said Paul K Thomas, MD and CEO of ESAF Bank.“Right now, our emphasis is on relying on our huge customer base to generate revenue. The amount of growth we see this year will be determined by how long the pandemic lasts and other external factors.