​‘ECLGS scheme supported MSME borrowers to a greater extent’

Most of the sectors have come back to normalcy to a greater extent. We have observed that for over 90 per cent of our customers, the activity levels have come back to more than 90 per cent of pre-Covid levels. Sectors like hotels, passenger transport, and education may take slightly longer time to come back to normalcy.

The ECLGS scheme was a God-sent one and we could not imagine what would have happened to the MSME sector if the scheme had not come. Exactly at the right time of opening up from the Covid-19 lockdown, the scheme was announced and it gave the required headroom for the MSME sector to start operations. We have so far disbursed over ₹1,800 crore and customers with exposure of up to 15 per cent of our MSME portfolio got benefited.

During the lockdown, all businesses had their fixed expenditure like rent and salary, to be paid without revenue. MSMEs, in particular, faced tremendous hardship during this period to survive. The ECLGS scheme, to a great extent, supported the business in this difficult period. They also have to go through the period of sub-optimal activity levels. They have to survive till growth and demand returns to normalcy. But the rebound was much better than anticipated.

We expect these could be about 5-6 per cent of our exposure option for restructuring, as communicated during our Q1 and Q2 results discussion. The exact quantum will be disclosed along with Q3 results.

As disclosed with Q2 results, accounts covering an exposure of about 70 per cent of our book received payments for all the six months as if there was no moratorium. We also received the dues for September at about 90 per cent of exposure. Things are showing a positive trend. Q3 numbers will be put in the public domain along with quarterly results.

As disclosed with Q2 results, we expect a slippage to closing advances ratio of 3-3.5 per cent current year. The stand-still clause is there on NPA recognition as the matter is sub-judice. Some accounts which were under stress even during pre-Covid-19 days may turn NPA immediately after the stand-still clause is lifted. We believe most of those customers who had good cash flow and repayment track record as on February 29, but faced stress because of the Covid-19 lockdown, will survive if proper restructuring/moratorium is given.

Banks like us have traditionally been focusing on gold loans and we are told that about 30 to 40 years back, 25-30 per cent of our book constituted of gold loans. Over the years we started focusing on gold loans only at rural and semi-urban branches where we don’t have much else to do, as a support to agricultural activities. For the past six months, we are seeing good growth in the gold loan segment which currently constitutes 14-15 per cent of the portfolio, up from 9-10 per cent a few quarters ago.

Currently, gold loans form an important part of fresh disbursements. As the regulatory loan to value (LTV) ratio is increased, the quantum of loan that can be given per gram is very favourable which makes banks a preferred destination for gold loans.

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