“The improvement in the efficiency of collection will be supported”


In its clarification, Axis Bank stated that it has complied with its underwriting practices and approval processes for any exposure taken in connection with Srei Equipment Finance and Srei Infrastructure Finance (collectively “Srei entities”).

There are enough indicators to suggest that the high collection efficiency observed in the second quarter will be sustainable, Sumit Bali, President and Head – Retail Loans and Payments, Axis Banksaid Shritama Bose. The festival-induced spike in growth had both an element of pent-up demand and people’s willingness to spend more, he said. Excerpts:

There are concerns about the quality of retail assets, as bounce rates on automatic debit transactions are still high, according to data from the National Payments Corporation of India (NPCI). Income has not returned to pre-pandemic levels. How do you see this play unfolding and what guarantees do you put in place?

The NPCI data also takes into account fintechs that provide low-cost loans. They have ECS mandates going through NPCI. These are small loans such as payday loans or short-term loans of two to three months. These have a larger share in the data and this skews the figure. When we look at our own numbers, obviously, when you have such a pandemic and shutdowns for almost three to four months, you will see some impact, but far from the numbers mentioned. It is shaping up to be much lower than we expected and that is what we indicated in our Q2 commentary. Gradually, the collection figures are improving compared to our estimated and projected figures. This rise will continue and the worst for the business and employee segment is over.

Some products, such as unsecured business loans, are inherently riskier, have a higher margin, and the impact is greater in this segment. We are looking at emerging data points to gauge it. Typically, for an unsecured business loan, you will not know the exact current state of the borrower’s business. For salaried customers, you have bank statements and most of them are your own customers, so it’s easier to assess. After taking all of this into account, things are certainly going better than expected.

According to some, the improvement in collection efficiency observed in the second quarter is the result of the liquidity accumulated during the moratorium period and may not be sustained. What is your opinion ?

After seeing the data for October and November, we think things are improving. September was probably a one-time rise in terms of people retaining cash and foreclosure or partial loan closing, but month-over-month the situation in terms of check repayment, repayment, and loan efficiency. recovery improves. Therefore, I think the improvement will be sustained.

Growth accelerated as the festival season approached. Do you see it maintaining itself thereafter?

This is the debate that we continue to have internally, but I have the impression that the resumption of the holiday season has been good. It had both an element of pent-up demand and people’s willingness to spend more. There are a lot of cool ideas from car dealers. Many first-time buyers come to buy a car because they need personal transport. Historically, after Diwali you see a few weeks of low weather, then in December when the holiday season begins people take vacations or travel, overall economic activity picks up and there is a turnover of money in the economy. economy. We have a feeling it’s on its way, based on our conversations with people in the entertainment and hospitality industries. Reservations for the holiday season have been good.

Even when you track credit card spending across merchant categories, until August-September there was nothing in retail stores, restaurants, or hotels. It started to improve week by week. The other interesting point is that when we talk to builders we find that the Homeownership Index is at its highest level in the last decade.

There was a clamor to review the zero-MDR policy in early 2020, but it then died out. How are the banks doing now on this part, given that it reduces part of your income?

I have a feeling the government and the regulator are moving towards more choice for the customer. Ultimately, it is the customer who will decide on his choice of product. Each product differentiation has a certain cost associated with it. We are seeing growth in digital payments and the arrival of more players. There are already quite a few disruptions in the payment space. We are observing the movement of the MDR towards zero or near zero levels. The materiality of this is reduced as there are a multitude of other payment options.

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