Money & Banking

‘Retail NBFCs survived liquidity scare because risk is spread out’

Vinson Kurian Thiruvananthapuram | Updated on July 04, 2019

Thomas John Muthoot, Chairman and Managing Director, Muthoot Fincorp

Retail NBFCs have not faced any issues with respect to access to bank credit except in the last months of the last quarter of 2018

Retail non-banking financial companies (NBFCs) are designed and operated to ensure that the ‘touch and feel’ of customers is retained and treasured despite inducting heavy doses of technology for driving incremental growth.

This has differentiated their business model and the business risk is spread out across a wide customer base, helping ward off liquidity or asset-liability management issues.

“This is unlike the players in the wholesale business who write larger cheques in loans, though secured, to single individuals/corporates,” said Thomas John Muthoot, Chairman and Managing Director, Muthoot Fincorp. “We deal in small-ticket-size loans with shorter tenors spread across a wider customer base; it provides for a more guaranteed cash inflow and regulated outflow,” John Muthoot told BusinessLine here.

Retail NBFCs have not faced any issues with respect to access to bank credit, except in the the last quarter of 2018. But banks have resumed lending to these NBFCs again, John Muthoot said.

At no point in time did his company or counterparts feel any redemption pressure.  The crisis in the sector is neither systemic nor structural. It could likely blow over as the economy turns around, he said. Muthoot Fincorp maintain face-to-face connect with lakhs of customers visiting its close to 3,600 branches across the country every day. A key objective has been to build on these footfalls and understand their financial needs.

“In over 90 per cent cases, small businesses turned to money lenders for emergency funds, Muthoot Fincorp employees found in a nation-wide survey,” John Muthoot said.

These insights prompted Muthoot Fincorp to launch, among a slew of small-business loan products, the 104-day MSME loan of ₹10,000, repayable in daily instalments of ₹100.

These small loans are used as working capital. An 18-day grace period is allowed for those unable to repay during the normal 104-day period.

Published on July 04, 2019

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