Commercial vehicle, microloans remain pain points for lenders in the second quarter

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IndusInd Bank, a major player in both categories, said recoveries in the auto finance segment were strong in the second quarter. The restructured pound in the segment grew more than 28% sequentially to Rs 3,969 crore at the end of the quarter.

Tensions in the commercial vehicle (CV) lending and microfinance segments remained high during the July-September quarter, although most lenders reported an improvement in overall asset quality. As rising diesel prices hit repayments from CV owners, collections in the microcredit segment have been affected by accessibility issues.

IndusInd Bank, a major player in both categories, said recoveries in the auto finance segment were strong in the second quarter. The restructured pound in the segment grew more than 28% sequentially to Rs 3,969 crore at the end of the quarter.

The bank’s management told analysts that a 35% increase in diesel prices had affected the profitability of vehicle operators. In addition, freight rates have been slow to catch up and have resulted in supply and demand issues. IndusInd expects sentiment to improve in the vehicle finance industry once fuel prices drop below Rs 100 per liter.

Other financiers said that while vehicle operators paid, they were unable to settle past installments due. Ravindra Kundu, executive director of Cholamandalam Investment and Finance Company, told investors on a post-earnings call that the overall trend for recoveries is positive. “Customers can pay for an IME, but they are not able to pay two or three IMEs to roll their accounts from step 3 to step 2 and from step 2 to step 1…”

With respect to microfinance, reaching clients for collections continued to be a challenge in a few states, such as West Bengal and Kerala. Sumant Kathpalia, Managing Director and CEO of IndusInd Bank, said there may be further restructuring of up to 6-8% of the portfolio and the bank has decided to take a hit and provide for it. There may also be an additional restructuring worth Rs 200-300 crore.

“Having said that, I have to say that we are carrying enough supplies to take care of it,” said Kathpalia. “I expect that in October-December, where we see buoyancy everywhere, I think a lot of these issues may be behind us.”

Bandhan Bank recorded a loss of Rs 3,000 crore in the second quarter as it built up provisions worth Rs.5,500 crore, including accelerated provisions on its existing APM stack. The overall micro-stress pool – NPA, restructured loans, special mention accounts (SMA) -1 and 2 – amounted to Rs 19,500 crore, or 24% of loans. The bank expects recoveries worth Rs 6,000 crore until the end of March, recoveries of credit guarantees worth Rs 3,000 crore and an unspecified amount from the debt relief program. loans from Assam.

RBL Bank said that catching up with old EMI repayments is also a tricky task for microfinance clients. Harjeet Toor, head of retail, inclusion and rural affairs, RBL Bank, said on a post-results call with analysts that the gross slippages in the micro-bank, although lower on a sequential in the second trimester, were still above normal. “The efficiency of collection is improving and we are seeing these clients stabilize in the existing delinquency compartments. “

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