With loan repayment at 80-85%, ESAF Small Finance Bank expects few defaults as moratorium ends

ESAF Small Finance Bank is expecting very few defaults as it said loan repayments were at 80-85% in the first week of September, after the moratorium period ended on August 31. The Kerala-based small finance lender has more than 96% of its exposure to the micro segment, where the average ticket size of the loan is Rs 33,000.

“Almost 100% of the loan customers availed the benefit of moratorium in the first two months (April and May) and it decreased to 80% in June-July, and by August it was down to 60%. Except for the city-based small trading businesses, we don’t see much problems in repayment. We don’t have much exposure in the corporate sector as our focus is mostly in the retail sector,” K Paul Thomas, managing director and CEO of ESAF said.

Thomas added that business was back to normal in the rural areas with the rural customers in farming and animal husbandry showing more resilience. The rebound has been slower in the urban areas with some sectors like tourism, restaurants and small traders affected the most.

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“We have past experience in dealing with such calamities like the flood of 2018 and don’t see any problem. We have daily collection and also weekly collection in the micro-sector. However, we estimate a little more delay in the MSME segment as they may take more time to come back to normalcy,” he added.

On the demand for credit, Thomas said it was low, at 50% of the pre-Covid levels, and sluggish. The bank estimated lower business in the current fiscal year with the lockdown having an impact on lending. The CEO said the bank would take a call on its initial public offering (IPO) plans after a review of the business and macro-environment after September. ESAF got a SEBI approval in March to raise capital.

The bank reported a net profit of Rs 190.39 crore in FY20, an increase of 110.86% compared to the year-ago period. Business during the last financial year increased 49.05% year on year to touch Rs 13,846 crore.

The bank was launched in March 2017 and within two years of its operations it became a scheduled bank in December 2018.