Since the COVID pandemic and the subsequent lockdown, most of our employees had to work from their homes. Our technology and administration teams ensured a smooth transition for employees so that they continue to work seamlessly and with ease. We also acknowledged the efforts of our front-line warriors who are assisting in the fight against this pandemic, by launching a special product called ‘Covid19 Warriors Griha Loan’ with a privilege interest rate for these warriors, says Deo Shankar Tripathi, Managing Director & Chief Executive Officer, Aadhar Housing Finance, in conversation with Elets News Network (ENN).
How is the housing finance segment dealing with the ongoing challenges thrown by the COVID outbreak and the lockdown?
The Indian economy has been hard hit due to COVID and prolonged lockdown. The economic disruption in the real industry has adversely impacted the BFSI sector and particularly so on the housing finance segment. The challenges thrown are namely protecting asset quality due to impact on collection, liquidity to meet liabilities and expenses, Fresh disbursements.
The Reserve Bank of India (RBI) announced various set of measures to protect loan assets of lenders and also support to customers by permitting six months moratorium on installment payment by those customers whose cash flow was impacted. Huge liquidity was infused in system and sector-specific measures to provide liquidity to HFCs through special refinance from NHB. Many companies have raised sufficient liquidity to meet their requirement for few months.
On collection front moratorium was given to customers who opted in and even those who could not repay their monthly installments. The most of team of branches were engaged to reach out customers to explain interest implication on moratorium and also pursue them to repay installments if cash flow is available. During May and June collection against demand improved substantially across HFCs which is expected to improve further as businesses improve with easing of lockdown.
Housing loan interest for new loans from the banking system are at all time low in line with reduction of REPO rate by RBI. The property prices are also expected to fall by 10/15 percent. The demand for loans was muted in June but likely to revive from among employees of the organized sector. The demand from self-employed and the informal sector will gradually revive with the revival of economy. Most of the companies have also tweaked their loan appraisal process to focus on less impacted sectors. Cost reduction and digitization is also aggressively pursued agenda during and after lockdown. We at Aadhar Housing Finance have continued to use digital platforms during the lockdown to ensure that customer service lines remain seamless.
There was a major change in housing finance regulations and RBI is now the new regulator. What are your views on this?
The regulation from NHB to RBI was shifted by the Government last year. It’s certainly good from financial sector regulation and financial stability point of view. RBI has already issued draft guidelines to harmonize NBFC and HFC regulation. From the HFC point of view, there will be effective monitoring and control of systematically important HFCs and at the same time, there will be a lot of policy support too. Except for regulation, all other supervisory, refinance related and developmental activities will remain with NHB. Speaking from the borrowers’ point of view there is likely to be some benefit and transparency in transmission of interest rate. Even like banks external benchmark for lending rate may also be brought for Housing Finance Companies (HFCs). The housing finance sector will definitely see more reform and alignment among various players.
At present many small HFCs are struggling for fund. The cost of funds of small and medium HFCs are very high due to high borrowing cost from banks and non-availability of funds from capital market. The trust deficit surfaced after IL&FS crises is also expected to vanish soon with RBI as regulator of both banks and NBFC/HFC. We may see a lowered cost of funding. The benefits of this move, if it comes, will be passed on to the borrowers as well.
How equipped, in your view, is India’s BFSI sector technologically to fight pandemics and calamities?
Even before the COVID-19 pandemic came knocking, the BFSI sector in India, over the past few years has been committed to equipping itself with the latest technological advancements. The pandemic has merely accelerated the process. The banking sector has completely embraced technology and is actively encouraging its customers to make use of digital touchpoints instead of retail. For the most part, this move has worked out positively. The footfall that banks used to receive has gone down considerably over the years. Thanks to UPI’s interoperability, the number of electronic fund transfers have shot up tremendously.
Infusion of digital technology in the financial services space via robo-advisors and trading and finance applications has led to an increase in non-traditional investments such as mutual funds and stocks. The Aadhaar Enabled Payments System (AePS) was used widely by postal service personnel to help people living in remote areas carry out banking transactions.
The BFSI sector has always been at the forefront of technological innovation and adopted technological advancements across a wide range of areas including customer experience and risk management. The insurance sector, for instance, has intelligently leveraged technology and moved the Know Your Customer (KYC) processes online. Considering all of these measures, I am confident that India’s BFSI sector is well equipped to fight both the current as well as future pandemics or calamities.
What major changes or technologies have you deployed at Aadhar lately?
Since the COVID pandemic and the subsequent lockdown, most of our employees had to work from their homes. Our technology and administration teams ensured a smooth transition for employees so that they continue to work seamlessly and with ease.
Working remotely: All our employees up to the level of branch manager, majority of HO teams, 40 percent + Central Credit Processing & central operations team are capable of working remotely. We have un-interrupted system uptime and availability for remote working 24/7, across functions.
We have through our existing resources and various strategic vendor tie-ups ensured both hardware and technical support to all our employees, all managed through an Online Ticketing tool on Web and Mobile with access to all users across India, 24×7.
With people working from home, there is lesser control on the external environment like internet connections, cloud storage and systems. In order to mitigate this, we have increased our focus on a stronger cybersecurity, in addition to keeping employees, informed and aware of various cyber frauds that they could be exposed to, especially during the current pandemic.
On the customer front, our earlier launched digital payment initiatives ensured that customers can seamlessly make their EMI payments from the comfort of their home. We also added tools for customers on our website such as moratorium calculator to enable them to know their eligibility and amount to be paid post the deferment of EMI.
What are your plans for the post COVID period?
Aadhar is already back in action post the lifting of the lockdown. Throughout the pandemic and the lockdown period, our primary endeavour was to activate ourselves to help with the needs of the lesser privileged during the pandemic. Various initiatives were undertaken by the employees of the company from distributing COVID essentials like Masks, Sanitizers etc to distributing food across our branches to the underprivileged.
We also acknowledged the efforts of our front-line warriors who are assisting in the fight against this pandemic, by launching a special product called ‘Covid19 Warriors Griha Loan’with a privilege interest rate for these warriors.
Further on the business front, our branches are already functional and our teams are geared to assist all who need to conclude their house-related needs. We as a business are also taking measures to check and ensure that the repayment capacity of the borrower is not affected due to this pandemic.
With the current pandemic situation and subsequent issues that people have faced due to unsuitable congested housing; there can be a stronger focus on homeownership post-Covid, which we as an organisation intend to help fulfill through our loan products. With migration of laborers back to their villages, we expect a surge in housing demand in tier 4 and 5 locations. We have already initiated process to reach out these small towns for catering housing needs. This will give us additional opportunities to serve underprivileged and also increase our business.