Covid-19: Mahindra Finance expects loan recast worth Rs 6,000 crore

Some customers have sought an additional two-three months to repay, meaning they would start to repay from January.
Mahindra and Mahindra Financial Services expect to restructure loans worth Rs 6,000 crore of 0.15 million customers under RBI's loan Covid-19 regulatory package. It will also work to keep net Non-Performing Assets (NPAs) below four per cent in the current fiscal end.

Out of 1.6 million customers, 100,000-150,000 accounts are likely to come up for restructuring. That amount would be around Rs 6,000 crore.

Some customers have sought an additional two-three months to repay, meaning they would start to repay from January. Another set of customers have sought reduction of Equated Monthly installments (EMI) for six months, said Vice Chairman and Managing Director Ramesh Iyer in an analyst call post Q2FY21 results. Its loan book rose to Rs 64,389 crore at the end of September 2020 from Rs 63,793 crore a year ago.

The lender is not giving them any additional money during restructuring. It the same outstanding that is due from them that is being given additional time either by giving moratorium or by reducing EMI size. The loan value will not be impacted after restructuring.

Iyer said there are certain segments which remain under pressure and will take longer to bounce back. These segments are taxi aggregators, the school bus segment, heavy commercial goods carrier or trailer as well as vehicles attached to hotels and tourist sectors.  The borrowers from these segments have not been able to service loans and these customers may come up for restructuring.

Finance company’s gross non-performing assets (NPAs) stood at 7 per cent as at September 30, 2020, against 7.9 per cent as at corresponding reporting date last year. The net NPAs declined from 6.4 per cent in September 2019 to 4.7 per cent in September 2020.

Iyer said the company has identified stressed assets by product category and region and has a team of 2,000 people earmarked to deal with these contracts (stress loan pool) for next six months. This approach is expected to bring down NPAs substantially by better recovery from these consumers. They are resorting to settlements instead of repossessions.

The company would maintain aggressive stance on provisioning and liquidating NPAs. It would work to bring down Gross NPAs by atleast by another one per cent and net NPAs levels to sub-four per cent, he added.  

The provisions and write-offs stood at Rs 619.4 crore in quarter ended September 2020 (Q2FY21), up from Rs 360.7 crore a year ago in Q2FY20. It made higher level of impairment provisions of Rs 433 crore during July-September 2020 quarter through management overlay to reflect deterioration in the macroeconomic outlook arising out of Covid-19 pandemic related disruptions.

Mahindra Finance’s provision coverage ratio stood at 35.1 per cent as at September 30, 2020, against 19.5 per cent as at September 30, 2019. The finance companies make impairment provisioning as per Expected Credit Loss (ECL) method in Ind-AS (new accounting standards).

The Company has complied with the prudential guidelines issued by the Reserve Bank of India and has been making accelerated provision.

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