Mahindra & Mahindra Financial Services expects its non-performing assets to further reduce in the current fiscal as the non-banking finance company (NBFC) starts repossession of vehicles in a small and calibrated manner, vice-chairman and managing director Ramesh Iyer told FE.
“We believe that at least the same accounts which are in NPA, we will see improvement in that. We should realise that last year, since November onwards we have not resorted to major repossessions and settlements…if there are some delinquent accounts which require us to take out the asset and settle it, even that will be resorted so if you take the same pool of NPA assets, we are very confident that they will show downward trend,” Iyer said.
Following the Hazaribagh incident in September last year, which claimed the life of a young pregnant woman, the Reserve Bank of India (RBI) temporarily barred Mahindra Finance from using third-party agents for recovery and repossession activities. The RBI lifted the restriction in January after the NBFC tightened its process of onboarding third party agents.“When we stopped repossession, I had said very clearly, repossession is last resort to solve recovery issues. When there are customers who say I want to surrender vehicle as I cannot earn, that is one type of repossession. Another is where we find that customers are intentionally not re-paying, they are using the assets but are not paying, we would use legal mechanisms to repossess our assets,” Iyer said.
“So repossession, even in past, have always been 2,500 to 3,000 vehicles per month on a total customer base of 2.5 million customers. So please do not understand that repossession will be aggressive activity and we will go out and want to settle lot of account through repossession. It will always be a very controlled, small activity, but important activity from an NBFC perspective as we do not want defaulter to not pay us if he using the asset and we do not want circumstantial borrowers who are under pressure to unnecessarily suffer the burden if they cannot earn,” Iyer said.Even though the NBFC did not resort for major repossession or recovery operations for the better part of H2FY23, its asset quality improved due to sustained collection efficiency. As per the Q4FY23 results declared on Friday, its collection efficiency for Q4FY23 stood at 99%. Consequently, gross-stage 3 asset ratio improved to 4.5% as of March end from 5.93% a quarter ago.
“We are confident and believe that this trajectory will continue, and we are at our lowest net NPA level of 1.9% and given the proficiencies we are seeing, we are extremely confident to believe that asset quality will hold on and we do not see any stress whatsoever,” Iyer said.Mahindra Finance’s total disbursements for the quarter ended March stood at Rs 13,778 crores, up 50% year-on-year. Consequently, the overall loan book increased by 27% to Rs 82,770 crore. Going ahead in FY24, the NBFC will maintain at least 10%-12% y-o-y disbursements growth, Iyer said.“This year (FY23) we have had close to Rs 50,000 crore disbursements. Let us say volume does not increase next year for us and stays at same 1 million, you will still see the disbursements will be higher at least 5%-7% because we expect there will be a price increase on it. Therefore for the same number of vehicles the disbursement value will go up. Then we are also expecting at least 5%-7% increase in volume. So very clearly, at least a 10%-12% growth (in disbursements) is very clearly visible, even in the base that we are in, based on OEM (original equipment manufacturer) volume prediction and value increase,” Iyer said.
He added that small and medium enterprises loans (SME) and pre-owned vehicle disbursements will also support loan book growth in current fiscal. “AUM (assets under management) will also be range bound (in FY24) because there will be maturity happening and new assets will come,” Iyer said.