MAHINDRA & MAHINDRA LTD. | Integrated Annual Report 2022-23

367 COMPANY OVERVIEW BOARD’S REPORT MANAGEMENT DISCUSSION AND ANALYSIS CORPORATE GOVERNANCE BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT STANDALONE ACCOUNTS CONSOLIDATED ACCOUNTS 36. Financial Instruments (contd.) (b) Credit Risk Management (contd.) Rupees crores Particulars 12-month ECL Lifetime ECL not credit impaired Lifetime ECL credit impaired Total Balance as at 1 st April, 2022 ........................................................................................... 532.58 1,417.38 3,059.68 5,009.64 — Transferred to/from 12 months ECL.......................................................................... 403.74 (279.62) (124.12) — — Transferred to/from lifetime ECL not credit impaired.................................... 37.44 (18.32) (19.12) — — Transferred to/from lifetime ECL credit impaired............................................. 1.00 (147.70) 146.70 — Loans that have been derecognised during the year.......................................... (74.86) (304.78) (983.93) (1,363.57) New loans originated during the year............................................................................ 352.65 72.35 137.55 562.55 Write-offs............................................................................................................................................. (0.09) (4.01) (853.32) (857.42) Net remeasurement of loss allowance.......................................................................... (652.91) (111.74) 1,042.71 278.06 Balance as at 31 st March, 2023 ..................................................................................... 599.55 623.56 2,406.15 3,629.26 Trade advances Rupees crores Particulars 2023 2022 Loss allowance provision........................................................................................................................................................................................................ 20.03 71.73 Impairment loss on financial services receivable for the year ended 31 st March, 2023 recognised in profit or loss of Rs. 1,203.79 crores (2022: Rs. 2,725.50 crores) includes bad debts and write offs of Rs. 2,635.73 crores (2022: Rs. 2,813.65 crores), reversal of provision for expected credit loss of Rs. 1,432.08 crores (2022: provision of Rs. 85.76 crores) and provision for loan commitments of Rs. 0.14 crores (2022: provision reversal of Rs. 2.39 crores). ‘12 months ECL’ and ‘lifetime ECL not credit impaired’ are collectively assessed. ‘Lifetime ECL credit impaired’ are individually assessed. Loan which are written off continue to be subject of enforcement activity. Significant changes in the gross carrying value that contributed to change in loss allowance The financial services business mostly provides loans to retail individual customers in Rural and Semi urban area which are of small ticket size. Change in any single customer repayment will not impact significantly to provisioning. All customers are being monitored based on past due status of outstanding loan and corrective actions are taken accordingly to limit the financial services businesses risk. Concentration of Credit Risk Financial services business’s loan portfolio is predominantly to finance retail automobile and allied equipment loans, housing loans and other business loans. The financial services business manages concentration of risk primarily by geographical region in India. The following table shows the geographical concentrations of financial loans as at year end: Rupees crores Particulars 2023 2022 Carrying Value ............................................................................................................................................................................................................................. 90,104.32 72,739.19 Concentration by Geographical region in India: North .................................................................................................................................................................................................................................................. 26,094.99 17,388.45 East ..................................................................................................................................................................................................................................................... 18,071.95 16,387.77 West .................................................................................................................................................................................................................................................... 26,391.41 22,547.51 South ................................................................................................................................................................................................................................................. 19,545.97 16,415.46 Total Loans as at reporting year ............................................................................................................................................................................. 90,104.32 72,739.19 Maximum Exposure to credit Risk The maximum exposure to credit risk of loans is their carrying amount. The maximum exposure is before considering the effect of mitigation through collateral. Narrative Description of Collateral The amount of collateral obtained, if deemed necessary by the financial services business upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral primarily include vehicles and residential units purchased by retail loan customers.