In Kerala, the lending and collecting institutions are taking a huge hit because of the state government making restrictions to restrict the service only for about three days a week, to try and curb the sudden surge in Covid cases.
On Thursday, the state government has announced a lockdown from May 8 till May 16. The government had also made restrictions about the physical loan recovery during the set time period for lockdown.
Currently with more than 4 lakh active Covid-19 cases in the state, and a test positivity rate of above 25%. Most of the municipal wards and villages with a high test positivity rate have become containment zones during this lockdown.
The managing director of Muthoottu Mini Financiers (MMFL), Mathew Muthoottu, stated that the Kerala government’s order against the recoveries during this lockdown would have a huge impact on the cash-based recoveries of all banks, lending institutions and NBFCs.
He also added that “However latest measures do not stop online transactions. Our branches are open and transacting business with a limited number of employees on alternative days as per the government norms in Kerala. It will be difficult for the customers to remit the loan payment on the said timeline. Keeping in mind the inconvenience of the customers, we are encouraging them to use our digital platforms to fulfil their requirements.”
The top officials of the private sector bank had told that the productivity in the branches as a whole has fallen drastically because of the restrictions that are being imposed.
“Our gold loan disbursal is likely to be affected due to the restrictions. People take a gold loan for emergencies and will take it from unorganised players if banks and NBFCs are closed. On the collection side, we expect minimal impact as people who know and are worried about credit history will make an effort to pay on time. Small traders and shops are likely to fall back on the payment due to a fall in income,” he said.
The MD and CEO of Manappuram Finance, VP Nandakumar, stated that these disruptions would be minimised because of the increase in customers using digital applications for transactions.
He also added, “In microfinance, although the centre meetings for collections may get interrupted temporarily, we have observed that customers are increasingly utilising the digital channels to make payments directly from their bank accounts. A large part of our collections now takes place through the digital mode. For instance, in our gold loans portfolio, the larger share of our customers has adopted the online gold loan (OGL) platform.”
The MD and CEO of ESAF bank, Paul K Thomas, stated that “The key factors affecting collection efficiency are the availability of cash flow and the logistical issues faced, vis-a-vis physical collection. However, our digital collections are now active and customers can pay their loans digitally.”
He further added on that by saying“Right now our focus is to bank on our existing large customer base, which will ensure revenues. The actual growth we clock this year will depend on how long the pandemic will last and other related external factors.”