An observation tells that the collection efficiency of bank loans improves in June. The banks started witnessing an improvement in loan collection efficiency in June. This observation came after the relaxation of multiple lockdowns in various states as the second Covid wave recedes.
For Equitas Small Finance Bank, the gross advances grew 15 percent YoY in the June quarter ending to Rs 17,839 crore. Earlier, it was Rs 15,573 crore in the corresponding quarter, last fiscal year. Sequentially, the bank’s gross advances have remained flat compared to Rs 17,925 crore in Q4FY21.
Equitas Small Finance Bank (ESFB) on Wednesday said its collection efficiency had improved to 83.49 percent in June, up from 77.8 percent in May. However, there is a decline in efficiency from the April figure of 105.16 percent. The billing efficiency of the bank has also inched up to 69.52% in June from 66.97% in the previous month. These trends are available as per the provisional figures filed by the ESFB with the stock exchanges. In April, the bank had clocked a billing efficiency of 84.68%.
A few reasons for the observed collection
Its MD & CEO P N Vasudevan, “The bank’s borrowers are largely in the informal segments, dealing in daily use products and services. There is a temporary disruption in the supply chain for these products and services due to the imposition of Covid-19 restrictions. However, during the month of June 2021, states in the west and north experienced improved collection efficiencies as lockdowns eased while southern states opened up towards the end of the month. We anticipate a sharp improvement in collections in the coming months as Covid wave two recedes.”
For Indian Overseas Bank, an improvement in the loan collection efficiency rate for small loans, vehicle, and housing loans is observed. The loan collection efficiency is seen at 85% between June and July from 70%-75% in May. The state-owned bank expects the recovery to be better in the September quarter.
Motilal Oswal has come out with its first-quarter (April-June 21) earnings estimates for the bank and insurance sector. The brokerage house expects Kotak Mahindra Bank to report a net profit of Rs. 1,563.4 crore up 25.6% year-on-year (down 7.1% quarter-on-quarter).
In a research note from Kotak on banks’ asset quality, the recovery environment showed improvement in 1QFY22. Although, even after the improvements it is still not fully normal. More discussion on the recovery environment will come as a trend for 2QFY22 given the impact of the second Covid wave. Besides small loans, the report expects banks to provide a positive outlook on corporate recovery. Especially, due to a few large resolutions that have been completed or will be completed soon.
For more such updates, keep watching this space!