Equitas Holdings Eyes Better Asset Quality As Microfinance Book, Costs Stabilise

A stabilisation in the microfinance book and a reduction in the cost-to-income ratio is underway at Equitas Holdings, setting the stage for an improvement in the bad loan ratio, Managing Director P Vasudevan told BloombergQuint.

The lender's share of operating costs in comparison to its operating income has stabilised, Vasudevan said. Operating expenditure reached a peak of 83 percent in the September-ended quarter and the firm will now leverage its operating costs and past investments to bring down the cost-to-income ratio.

The lender's microfinance book was hit by demonetisation when a large portion of borrowers stopped repaying loans in the three-four months following the note ban. NPAs rose and profitability took a hit due to non-payment of dues, Vasudevan said.
Gross non-performing assets of the company stood at 5.76 percent in the last quarter, rising 85 basis points sequentially.

Even as the microfinance book's share has fallen to 34 percent from 46 percent since the beginning of this year, the rest of the book has been stabilised in the last two quarters. Equitas Holdings expects a growth of 15 percent in loan advances going forward.