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00:00Rajesh Sharma, M.D. at Kepri Global Capital, joining us.

00:05Mr. Sharma, always good speaking with you, first off.

00:08Just give us trends on what is happening on ground with regard to especially SME.

00:14And I'm not talking Kepri Global specific, I'm talking about the industry as a whole.

00:19From a lending perspective, just give us a lens.

00:22How is asset quality shaping up?

00:24Are you seeing a collection problem in the industry as a whole, including peers, etc.?

00:31What you've got your ear on the ground, give us some perspective.

00:36I believe that MSME collection efficiency is relatively good, except those cases which

00:43are restructured during the COVID and some of the MSME units are affected.

00:48That is where we see some delinquency trends rising, but the demand of the new loan as

00:54well as the collection efficiency in the loans which are not restructured, I think they are

00:58doing pre-COVID levels.

01:02And in second half, as usual happens, we're clearly seeing a very good growth trend.

01:07So MSME, there's a huge gap, particularly in the segment where we operate on the non-income

01:12group and small customers.

01:14So I believe that with the growth of the economy, a lot of orders, a lot of business also flow

01:19down to MSME.

01:20And I see that MSME sector will continue to grow.

01:23Government have also the focus on that.

01:25There is a slight interest rate hike have happened.

01:29So that is where we feel that there is a pressure in terms of the interest rate on the MSME,

01:35but believe that they are small size, they should be able to cope with it.

01:40Right, and shouldn't that also reverse if at all the repo were to maybe be taken down

01:46by maybe 25 to 50 basis points?

01:48And how quickly will that pass through happen for you in particular?

01:51Because you spoke about it and hence I'm just quickly asking you that question and trying

01:55to cover it.

01:56So probably every agent may require a local meetings everywhere it takes place.

02:02They take into account their cost of fund and the market.

02:06So I think market is so competitive, the interest rate, cost goes down that immediately in the

02:11next month or so for the floating rate loans, it will start to pass down.

02:16And now the RBA has also suggested that no foreclosure should be charged.

02:20So I think the market will decide if anybody is charging more, the customer will move out.

02:24So that is a healthy trend that the rates will be competitive.

02:28And whenever the repo rates come down, I think the same benefit will be passed to the customer.

02:34In his latest address, the finance, the RBI governor suggested, of course, that NBFCs

02:43have a large role to play in the economy.

02:45He underlined how growth has been extremely strong.

02:48But he also said that certain practices need to be curtailed.

02:55Do you believe that on ground as well?

02:57And I'm again talking from an industry wide perspective.

03:01Do you believe that competition is heightened?

03:04Risk has been adjusted well or not adjusted well?

03:07What's your sense with regard to lending?

03:12I think there is more coming.

03:14My belief is there is more coming for the unsecured and digital lending where collections

03:19are not possible and all the losses essentially most of the time need to be written off.

03:28So I think there are more cautions towards lending and unsecured backed by a lot of growth.

03:34A lot of new players are coming there.

03:36As far as the secure lending piece is concerned, affordable housing, MSMEs or anything else,

03:41still the loan to value norms are quite robust to take good care of any kind of losses.

03:48So regulators see from the 360 degree view and I think they are well capable to assess

03:54all the data and caution.

03:57I think RBA over time working to strengthen this sector by bringing good practices and

04:02that will help us when anything goes wrong.

04:05These good practices are going to make the sector to face those adversities.

04:11So I think it's a good trend that now the compliance, the risk mechanism, the risk analytics,

04:16everything is now RBA is focusing, the MVFC also should come up.

04:21And that is happening over a period of time.

04:23So I think it's a good thing.

04:26And you know, gold loans is something you do.

04:29It's probably 30% of your portfolio.

04:31There's been plenty spoken about where gold loans is concerned.

04:36Now, let me talk from a Capri Global specific perspective.

04:40Any gaps that you believe or you are trying to address within your processes out of all

04:46the 7 or rather 6 deficiencies which the RBA has highlighted?

04:53So we have taken the note of that.

04:55The independent audit department decides that we also get audited by our co-learning partners

05:02or a statutory auditor and sometimes ASF auditors.

05:05We have multi-layer audit.

05:07We are making processes more robust.

05:10We have engaged with the outside firm, accounting firms to do their independent technology audits

05:17if there are any gaps.

05:19So we are all seeing that we are also able to plug the gaps.

05:24Having said that, I think the concern more comes when somebody places a gold letter.

05:29It is any kind of a situation in the economy overall.

05:34So I believe that small borrowers borrow these money for short-term requirements rather than

05:39they don't get that money from the formal banking system.

05:43And that is where we come in.

05:45If the gold loan and BFC will not land, then the customer will be forced to go to the money lender

05:51with a much higher rate of interest.

05:54In some way, we are helping customers to reduce their costs.

05:57There is enough competition in this segment.

05:59This is ensuring that the customer also gets a reasonable pricing.

06:03But everybody is enhancing their governance standards and assurance practices based on RBA's advice.

06:12Point taken.

06:13With regard to all of this, you have guided for FY27 AUM of 30,000 crore.

06:21You are roughly at 18,000 crore at the end of Q1.

06:24Do you believe a slowdown coming in likely due to all of these factors playing out?

06:31Asset quality, gold loans, some amount of regulatory overhang also?

06:38So I think we are a subset of the growth of the economy.

06:41If the economy will continue to grow, if the demand of the term loan working capital will

06:46continue to rise, the sector will continue to grow.

06:50It happens only when we see clearly either the liquidity is not available or the demand

06:55is not available.

06:56So I believe that demand is there and the way our government, every other state government

07:03and central government is targeting the growth and enabling visualization in the policy,

07:10I believe the growth will percolate to the MSME and hence the loan demand will be there

07:14and without credit being made available, even the growth can't be complimented.

07:20It is interlinked.

07:21So I believe the growth trend, it will continue, the demand will continue to rise and back

07:25of that demand, we hope to achieve that AUM growth.

07:29Of course, the caution is there.

07:33Our board is also now looking more into this.

07:37In fact, our board is following the policy of compliance first and business later.

07:41So with that, but I see that if there's no downturn in the economy, there's no reason

07:48that we will not commensurately grow the book and overall sector and the business will grow.

07:54But some competitors engaging in practices which the regulators are not happy about,

08:00give us that context.

08:03So I think the regulator when they take the conditions, he firstly warn them and I believe

08:08they are well capable to take the required guidance and action.

08:14So regulatory framework is strengthening the practices.

08:17And I believe that going forward, every NBFC is investing in technology processes,

08:25assurance practices, and that is going to make the sector very, very robust.

08:29So I think it is very healthy move.

08:32It might give the short term some pain and the cost, but in the long run, it makes the

08:38sector very, very robust.

08:40So we welcome that.

08:41Everybody is engaging nowadays, every quarterly basis to strengthen their internal audit,

08:46their compliance, their outside advisors to audit and to suggest how do we improve that.

08:53So I think that is a good thing that regulator is guiding, regulator is intervening,

08:59and that is going to result in improving the sector.

Capri Global: More Caution Needed With Gold Loans? | NDTV Profit

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