In an exclusive interview with Zee Business Managing Editor Anil Singhvi, Ujjivan Financial Services MD & CEO Nitin Chugh talked about the bank’s performance in FY21, net income, margin, asset quality, and business outlook among others. Edited Excerpts:  

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Q. The net interest income is at 21 per cent (y-o-y), which is comparatively low this time and the net interest margin has also dipped by 8 per cent. What is the reason behind this performance?  

A. The interest income of a non-performing book has been derated to Rs 75 crore. And this is the reason our total income and net interest margin have declined. We are systematically moving to other businesses as well. And now 28 per cent of our portfolio is of non-micro finance, which is housing finance and MSME loans. Also, we have now started dealing with formal segments for the past few quarters. And this also the reason, our NIMs are low as earlier it was just microfinance.

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Q. So you are saying that the net interest margin will continue at 8 per cent or below?  

A. No, the net interest margin has also impacted due to this. But as we are moving towards the formal segment, the rate of interest is low and that is the reason NIIs and NIMs will be low. But the best part is our operating expenses is also reducing now. We have cushions available for this also.  

Q. The asset quality that has increased rapidly (y-o-y) from nearly 5 per cent to 7 per cent now. NP was 2 per cent and now it is 3 per cent. What is the reason behind the weakening of asset quality? Also due to the Covid-19 second wave, the work is less comparatively. So, is this the reason why your NPA levels will be high or will create a problem? 

A. Our business is for small borrowers, marginalised set of customers. The area of work belongs to unsaved categories of customers, so the impact is on mainly these segments. When the economy is disturbed then people with small businesses, the low income also gets impacted. We projected 5 per cent impact on this segment in December last year. We had this trending that this portfolio will be impacted. We have also witnessed that many have lost their regular income.  

About the second wave, this time the cases are more in rural areas as well. But now the cases are reducing. With our preparedness and the RBI’s second framework, I believe this time we won't face the problem that we faced last financial year. But we will support our customers through restructuring this time.  

Q. How are the collection levels this time? Are demands for loans also improving? Please comment on the business environment.  

A. The demand has changed drastically; it has slipped now. Last year, the supply was short, but this time, the demand is short because the overall economy has impacted, as per the RBI. But we feel, the demand will come back become things are now normalising again. Overall healthcare, infrastructure is improving.  

In the case of collection efficiency, we reached 94 per cent in March 2021 and it was improving. Over 96 per cent of our customers had started paying. But then due to the lockdown in April this year, our collections got impacted. Also, our employees and their families got infected with the Covid-19 this time. So, in April, our collections impacted and slipped from 94 per cent to 88 per cent. May 2021 will also see the same. Overall, the situation is grave with the lockdowns, and people staying indoors. So, I feel, this will continue for some time.