We live in unprecedented times. The world is grappling with a crisis that lacks parallel in recent history and comes with significant ramifications on life as well as livelihood. The emerging new normal has the potential to alter the way we work, engage and socialise. Every major crisis, however, brings out the best in humanity, and this has been no different. Collaborative actions that transcend boundaries have strengthened our resolve to emerge stronger.
The nationwide lockdowns imposed to break the chain of coronavirus transmission rightly prioritised life over livelihood. The government also announced massive stimulus package to kickstart the economy with special focus on the bottom of the pyramid and MSMEs. The Reserve Bank of India (RBI) announced emergency rate cuts and various measures to improve liquidity and stabilise the system. These coordinated efforts would go a long way in building a ‘self-reliant’ India.
Since our inception, we have focused on financing self-employed individuals in the informal economy. Today, as a modern, technology-driven bank, we remain steadfast in our commitment to finance the underbanked segment by channelling deposits generated from affluent and mass affluent segments. We are on track to achieve our vision of building a stable, scalable, and sustainable banking franchise.
OPERATING LEVERAGE PLAYING OUT
With the buildout phase now behind us, we now see operating leverage playing out. With the same branch network, we clocked a 31% growth in advances and 26% in deposits excluding CD, while our cost-to-income ratio improved by 390 basis points to 66.38% in FY20. Our Profit Before Tax (before provisions and writeoffs) grew 40%. Asset quality remained steady through the year, with Gross Non-Performing Assets (GNPA) at 2.72%.
On the liabilities front, deposits excluding CDs grew 26% while retail Term Deposits (TD) grew 133%. Current Account & Savings Account (CASA) as a percentage of total deposits stood at 20%. Our digital banking products like Selfe Saving and Selfe Fixed Deposit (FD) played a significant role in driving deposit growth. With a ‘digital first’ approach, we are also working on several initiatives to further improve customer onboarding experience.
Net Interest Income (NII) grew by 30%, while Net Interest Margin (NIM) came in at 9.11% versus 8.55% in FY19. Profit After Tax (PAT) grew ~16%. We remain well capitalised with total CRAR at 23.61% and Tier-I CRAR at 22.44% (as on March 31, 2020), well above the minimum regulatory requirements of 15% and 7.5%, respectively; Tier II CRAR was at 1.17%. Meanwhile, our liquidity coverage ratio (as on March 31, 2020) stood at 133.2%, significantly above the regulatory requirement of 90%.
RESPONDING TO PANDEMIC IMPACT
Our business has been impacted by the lockdown since the end of March 2020, with almost zero collections. However, we have kept most of our branches open and ATMs operational during this period to assist customers. We encouraged our customers to opt for the moratorium for the months of March, April and May 2020 (allowed by the RBI) to tide over any liquidity issue during the lockdown, and subsequently kickstart their business as the lockdown eases. In fact, opting for moratorium for this period was rolled out in a default mode. For opting out, customers needed to contact the Bank.
From middle of May, across the country many businesses have started opening up albeit slowly. And we see an increasing trend of the economy coming back to full activity going forward. Accordingly, for the moratorium announced by the RBI for the months of June, July and August 2020, we are encouraging all customers, who have the liquidity to start paying their instalments to ease the burden of additional interest accruals. Moratorium for the second tranche is being allowed only to those customers who come back to the Bank with a request for the same and after they have fully understood the implications of additional interest due to postponing their instalment payments.
During the lockdown, our teams have been in touch with our customers. And there is a general sense of optimism about bouncing back to near-normal levels in a short time frame. As a larger part of our customer base deals with essential products and services, they are likely to be relatively less impacted. Further, rural and semiurban borrowers also seem to be less impacted, as ~53% of our microfinance and 50% small business loans, and ~20% of our vehicle finance are located in semi-urban and rural locations.
The unmet demand in the segments we deal with remains very high at over ₹12 lakh crores, according to various government estimates. However, we need to see how the markets open up and how life comes back to normal as the pandemic subsides and the economic engines are restarted. For our microfinance customers, we have launched Vishwas Loans, which will enable them to bridge any immediate requirements and revive their businesses. We are also looking at providing top-up loans to our small business loan customers.
Liquidity Coverage Ratio
Given the fact that majority of our customers are from the lower income households, our CSR teams engaged in skilled training, develop videobased learning modules to train small borrowers in making masks, hand wash, door mats, micro green products. These demo videos were sent on WhatsApp to all our women customers across India, both in Tamil and Hindi. They could either consume these products themselves or start selling as soon as the lockdown is lifted. In fact, many have started to generate supplemental income.
We are blessed to have a large and committed team of over 15,000 employees. During the COVID crisis, we rolled out employee‑friendly HR policies, especially for those staff who are at the lower rung of the organisation. We provided incentives to field‑based people for the lockdown months of March, April and May 2020 based on the average of the incentives earned by them over the three preceding months. We also rolled out other pocketfriendly initiatives. Meanwhile, our people at the upper middle to senior management level took a voluntary cut in their compensation to help the Bank during this stress period.
A large employee connect programme was launched, with me connecting directly with every employee in the Bank. This was followed by audio calls and Q&A sessions with me and has now been followed up with an ideas@equitas portal for all employees to give their ideas and suggestions to us. With the enthusiastic support of such a large team, we are confident of managing the situation as best, if not better, than anyone else.
P. N. VASUDEVAN
MD & CEO