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Equitas to diversify products for a sustainable model

Equitas has in the past year started a Small Finance Bank (SFB)

Gireesh Babu  |  Chennai 

The company has merged its microfinance entity and housing finance entity with Equitas Finance, when it received the SFB license

With the microfinance business facing various challenges, Holdings has said it is looking at diversifying products to evolve a more sustainable model for the long-term. The company has said that its microfinance business has been slowing down.

Equitas, which has in the past year started a Bank (SFB), said that after demonetisation, the microfinance business has seen an increase in delinquency levels.

"This trend is worrisome as the nature of this risk makes it difficult to fathom at this stage the long-term impacts it could have on customers’ repayment culture and credit discipline. This uncertainty makes risk mitigation extremely difficult," said N Rangachary, chairman of the company to the shareholders in its annual report for the year 2016-17.

It has been a prudent lender in the segment with low loan ticket size and filtering out customers who have tended to borrow from other lenders etc, he said. It has also been working to make the credit bureau services available to the micro industry, which helps it to factor in earlier borrowings by the loan applications.

"Inspite of these, our microfinance portfolio has also seen delinquency levels going up over the past four months. Though, impact on our resources at this stage is not very worrisome, it is felt that the continuance of this phenomenon may  significantly affect our microfinance operations. We will be calibrating our product mix such that we are able to build a strong and diversified portfolio of various types of loan products which would help create a sustainable  model for the long term," he added.

During the current financial year, the company would focus on accelerating contribution from new loan products to offset the slow down in microfinance, while retaining strong control over quality of portfolio. The company has merged its microfinance entity and housing entity with Finance, when it received the SFB license. 

In FY17, the business of the company, including microfinance and other businesses, grew to Rs 1,553.82 crore as compared to Rs 1,115.12 crore. But, the company says the microfinance business has seen a slow down.

Microfinance advances as of March 31 stood at Rs 3,293 crore, with demonetisation affecting disbursements during months of November and December 2016. As a prudent measure, the disbursement of loans post demonetisation was moved entirely to the bank mode against the earlier 70 per cent cash disbursement.