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Bengaluru-based CreditAccess Grameen Ltd will observe moratorium on principal repayments to its lenders between March 30 and May 31, 2020. But the microfinance institution said it has made a prudent decision to continue to pay interest to its lenders during the moratorium period.
Simultaneously, the company emphasised that it has sufficient cash balance of ₹530 crore as on March 31, to sustain business operations over a reasonable period of time.
Under the Reserve Bank of India’s Covid-19 package, borrowers can seek rescheduling of term loans and working capital facilities from lenders on payment of all installments falling due between March 1 and May 31.
The company, in a statement, said it has successfully financed the MMFL (Madura Micro Finance Ltd) transaction in March and honoured all principal and interest payments till March 29 on the back of strong balance sheet position and prudent liquidity management.
CreditAccess added that it has completed the purchase of 76.06 per cent stake in MMFL by paying ₹661 crore in March within stipulated timelines.
The company emphasised that it has sufficient capital adequacy to manage its growth in FY21. There is no immediate need to raise equity and the company can wait for the market conditions to improve over the coming year, it added.
Loan moratorium policy
In accordance with the loan moratorium guidelines issued by RBI on March 27, the company said it has framed its loan moratorium policy, which will be applicable to all the existing borrowers across India.
Moratorium will be allowed on all instalments falling due between March 1 and May 31. For the borrowers who have already paid instalments after March 1, CreditAccess said required adjustments will be made so that moratorium is applicable for the remaining instalments till May 31.
Proven resilience of rural markets
The statement said as on date, there has not been any significant impact on the rural economy, especially in the regions where the company operates.
“The immediate fallout of lockdown has been more severe in urban locations, especially on the migrant population. Reverse migration might create some difficulties with concerned families for a temporary period.
“While this is an unprecedented situation, based on historical experience, rural economy has always been more resilient and capable of returning to normalcy after natural disasters/external disturbances,” the company added.
CreditAccess observed that a larger percentage of rural population is typically self-sufficient, operating within a particular geography, where the production and consumption is largely local.
“Further, majority of rural expenditure is on essentials. In case of any economic difficulties, they are able to manage with captive production/consumption and minimal expenditures.
“Furthermore, various measures announced by the government under the food security/economic relief package will aid the poor/low income households (our customer base) to tide over the temporary difficulties,” it said.
CreditAccess provides micro-loans to women customers, predominantly in rural areas. It is now operating in 230 districts in the 13 States (Karnataka, Maharashtra, Tamil Nadu, Chhattisgarh, Madhya Pradesh, Odisha, Kerala, Goa, Gujarat, Rajasthan, Uttar Pradesh, Bihar and Jharkhand) and one Union Territory (Puducherry) through 928 branches.
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