There is going to be a spike in delinquency: Capri Global MD

You are someone who works with the bottom of the pyramid economy -- be it small and medium enterprises or be it individuals. That section is likely to be hit most because of the Covid-19 shutdown and the impending slowdown. What are you expecting from the finance minister?
The MSME and the small businesses sector is going to face problems as their earnings losses are inevitable and in view of that, they may not be able to meet their financial obligations towards vis-a-vis their borrowings. They need a moratorium of a minimum 3-6 months, ideally six months, when all their repayments towards NBFC and banks are deferred.

Second, they would look for some cut in interest rates because it will take quite some time to bounce back to their earlier earning levels. The job losses are happening now that the entire cash flow of the small businesses is completely down.

So, their earning losses have to be compensated by lower interest rate and the credit line has to be made available so that they can cope up with this kind of unprecedented situation.

You are running a large organisation in the lending space. How is the lending situation right now? Has your average cost of borrowing edged lower in the last eight-nine months?
In the last three to four months, while the government has intervened and DFS has started tracking the disbursement, money was adequately available. While the cost of funds have not gone down much because the discussion with the lender used to be only about the money and not the rate of interest. So, the rate has not come down as such for either housing finance or MSME sectors when an NBFC goes to borrow from the banks.

But the National Housing Bank has given a much lower rate to the housing finance companies. That can be a relief to the NBFCs as well as the end users, the MSMEs.

How have you been coping with the shutdown at Capri Global?
Our entire team and specifically the collection team engage with the customers because the latter’s businesses come to a sudden halt if they are not able to generate cash flows. We are keeping in touch with them because the EMIs are due in March. We are trying to assess if they need any funds. While we are not disbursing any money at the moment because we do not know whether the lockdown will be only up to mid April or might get extended. We are taking conservative view but we are trying to help some of the genuine borrowers who are in the grocery, essential supplies business where they need more working capital.

We are considering disbursing money to these kinds of customers on a specific case basis. However, our collection team is keeping engaged with the customers for their upcoming repayments asking whether they need any help or if they would not be able to make the payment. We are analyzing our entire portfolio on a risk basis.

Over the last few quarters, Capri Global has managed to maintain steady growth while keeping asset quality under check. Would you consciously scale back growth a bit and focus more on collections so that asset quality remains in check? What would your strategy be in this new environment?
All the NBFCs and banks see a lot of disbursements lined up in the March because March is the month of highest disbursement for everybody. Of course, growth is going to be stuck. We are not going to grow this month because nobody is on the ground. Our strategy is going to be yes, we are worried on the asset quality side looking at how some of the businesses may not be able to pay their EMIs. They might pay their EMIs partially. There is going to be a spike in delinquency. So let us see how the situation evolves.

While we are keeping engaged with our customers, collection has come to a halt. We are worried about this month. On April 1 or April 5, when EMIs come for repayment, we might face some resistance and delinquency.