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<ul class="summary-list"><li><keyword id="20475039" type="General" weightage="20" keywordseo="Tyson-Foods" source="keywords" meta.keywordsubtype="org" meta.entityname="Tyson Foods" meta.hostid="261" meta.entityid="Tyson Foods">Tyson Foods</keyword>' former CFO <keyword id="23150648" type="General" weightage="20" keywordseo="John-Randal-Tyson" source="keywords">John Randal Tyson</keyword> will not return to his position after a DWI charge.</li><li>Tyson who is an heir to the founder, was suspended following a DWI charge in June.</li></ul>Tyson Foods' chief financial officer is out of his job — but not out of the company. John Randal Tyson, an heir of founder John W. Tyson, was suspended from the company after being arrested on charges of driving while intoxicated in June. That marked <a target="_blank" class="" href="https://www.businessinsider.com/tyson-foods-cfo-embarrassed-sorry-after-arrest-wrong-home-bed-2022-11">his second alcohol-related arrest since his CFO appointment in 2022</a>. On Thursday, <a href="https://www.businessinsider.com/child-labor-tyson-foods-perdue-farms-chicken-investigation-2023-9" target="_blank">the meat juggernaut</a> announced that its longtime staffer Curt Calaway, who was the interim CFO, would take over. Tyson will stay on as an employee but will be on <keyword id="23150653" type="General" weightage="20" keywordseo="health-related-leave" source="keywords">health-related leave</keyword>, the food company said in a release. Tyson was appointed to the role in 2022 at age 32, making <a target="_blank" class="" href="https://www.businessinsider.com/tyson-foods-cfo-embarrassed-sorry-after-arrest-wrong-home-bed-2022-11">him the youngest CFO of any Fortune 500 company</a> at the time. The <a target="_blank" class="" href="https://www.businessinsider.com/who-owns-tyson-foods-history-2023-5">fourth-generation Tyson family member </a>became CFO three years after he joined the company. He previously worked in <keyword id="19939232" type="General" weightage="20" keywordseo="investment-banking" source="keywords">investment banking</keyword> at <keyword id="19967624" type="General" weightage="20" keywordseo="JPMorgan" source="keywords" meta.keywordsubtype="org" meta.entityname="JPMorgan" meta.hostid="261" meta.entityid="JPMorgan">JPMorgan</keyword> and graduated from Harvard and Stanford. Tyson Foods did not immediately respond to Business Insider's request for comment sent outside regular business hours. The company, known for its Hillshire and Sara Lee brands, is worth $23 billion, and the Tysons are worth $3.1 billion, per Forbes. <h2>Two arrests in recent years</h2>During the first incident in 2022, Tyson was found intoxicated and asleep in a stranger's bed around 2am, <a target="_blank" class="" href="https://www.businessinsider.com/tyson-foods-cfo-embarrassed-sorry-after-arrest-wrong-home-bed-2022-11">Business Insider previously reported.</a> The home where Tyson was found belonged to a woman who said she thought Tyson came through her unlocked front door. He was released later that evening after being charged with public intoxication and criminal trespass. In June, Tyson was charged with driving while intoxicated and careless driving after he misjudged a turn and rode up onto a curb. The scion's run-ins with the law are not the company's only <a target="_blank" class="" href="https://www.businessinsider.com/child-labor-tyson-foods-perdue-farms-chicken-investigation-2023-9">controversy in recent months</a>. In September 2023, The New York Times Magazine <a target="_blank" href="https://www.nytimes.com/2023/09/18/magazine/child-labor-dangerous-jobs.html">published an investigation</a> that showed children as young as 14 were knowingly employed as overnight cleaning staff at plants run by companies including Tyson Foods. Some were gravely injured on jobs that federal law prohibits children from doing. Tyson Foods did not respond to a request for comment from BI at the time. The Department of Labor subsequently investigated child labor at Tyson and Perdue Farms as part of a broader probe. No charges have been filed. In November, <a target="_blank" class="" href="https://www.businessinsider.com/tyson-recalls-frozen-chicken-nuggets-customers-find-metal-pieces-2023-11">Tyson Foods recalled</a> almost 30,000 pounds of its frozen dinosaur-shaped chicken nuggets after complaints that the nuggets contained small metal pieces, the US Department of Agriculture's Food Safety and Inspection Service <a target="_blank" href="https://www.fsis.usda.gov/recalls-alerts/tyson-foods-inc--recalls-chicken-patty-product-due-possible-foreign-matter">said</a>. Correction: August 30, 2024 — An earlier version of this story misspelled the name of Tyson Foods' new CFO. It's Curt Calaway, not <keyword id="23150652" type="General" weightage="20" keywordseo="Curt-Callaway" source="keywords">Curt Callaway</keyword>.

Tyson's finance chief is out of the job. The Tyson heir got the gig at 32, making him the youngest Fortune 500 CFO.

Imagine this. You have a younger sibling you’re mighty envious of. And why not? Unlike you, they seem to enjoy all the freedom and money in the world. They party like there’s no tomorrow, and here you are, stuck in a boring, ultra-disciplined but responsible routine that feels completely devoid of any independence, and mostly, funds. But of late, things are changing. This sibling is in massive trouble and just cannot escape the parent’s wrath anymore. Long story short, the party is over, and it is time to go back home. The rising defaults on this sibling’s part have now begun pulling the entire house down, thereby attracting the regulator’s ire. <h2>The Wild West of microfinance and unsecured loans</h2>It's hard to ignore the issues with microfinance and unsecured loans in India. Many saw them as a small gamble and ignored the rising defaults much like the younger siblings’ tantrums, and now they find themselves in hot waters. The skyrocketing instances of non-payments aren't a micro-issue anymore and are threatening the stability of the entire banking system. In the quarter ended September 30, 2024, 5 of India’s 8 largest private sector <keyword id="19934118" type="General" weightage="20" keywordseo="banks" source="keywords">banks</keyword> reported a steep rise in their bad loan book, mostly thanks to microfinance loans. Some banks, in a bid to strengthen their fortress against these <keyword id="142154" type="General" weightage="100" keywordseo="bad-loans" source="Orion">bad loans</keyword>, have significantly upped their provisions. For instance, <keyword id="46717" type="General" weightage="20" keywordseo="IndusInd-bank" source="Orion">IndusInd Bank</keyword> set aside Rs 525 crore during July and September 2024 to battle the menace of defaults on microfinance loans, which make up about 9% of its total loan book. See, banks rely heavily on their interest income, which they earn from advancing loans. Any loan where the borrower has not paid interest to the bank or defaulted for 90 days or more becomes bad, i.e., an <keyword id="79363" type="General" weightage="20" keywordseo="npa" source="Orion">NPA</keyword>, or non-performing asset for the bank. And who likes things going bad? Simply put, there has been a steep rise in three areas, much to the dislike of banks and MFIs (micro-finance institutions). But hey, it's mostly their doing! <ol><li>GNPA ratio (gross net performing assets): The quantum of non-performing assets a bank has in proportion to its total assets.</li><li>Provision: The amount banks set aside to take care of such NPAs.</li><li>Slippage ratio: The rate at which good girls go bad, or the speed at which good loans turn into NPAs</li></ol>But how are these plaguing the Indian banking sector? And what does the road ahead look like? We decode it for you. <h2> Microfinance: A not-so-micro-menace</h2>Microfinance loans were initially brought forth for low-income households and individuals, i.e. for those who might not generally have access to traditional ways of credit, like bank loans and more. They don’t require collateral or an asset to be pledged in lieu of the loan, making it a tad bit easier for borrowers. As of June 2024, the amount of outstanding loans in the microfinance industry stood at a staggering Rs 4,20,256 crore. Of this, NBFC-MFIs accounted for 40% and banks made for 33% of these. In 2022, <keyword id="30067" type="General" weightage="20" keywordseo="RBI" source="Orion">RBI</keyword>, in a bid to inspire some competition in this space, did something radical-they did away with the ceiling on how much interest MFIs could charge their customers. Previously, MFIs could add up to 12% to their cost of acquiring funds to determine the final interest rate chargeable to the consumer. So, assuming that Bank A incurs a 5% cost to acquire funds for further loaning, A could charge up to 17% interest from the end consumer. So, interest rates were in the hands of MFIs, and boy, did they have a gala time with it. Instead of spurring some healthy competition, as RBI expected, MFIs and banks went rogue and all guns blazing, competing for the title of “Who will charge the highest interest?” Recently, RBI banned 4 microfinance institutions (MFIs), namely Asirvad Micro Finance Limited, Arohan Financial Services Limited, DMI Finance Private Limited, and Navi Finserv, from disbursing loans effective October 21, 2024. Why? Because they were charging 14% extra interest over their original cost of funds. To maintain their loan books (and pockets), banks and NBFCs resorted to shady practices like netting off loans, which RBI has now advised MFIs against. Here, lenders allow borrowers to settle a previous outstanding loan by issuing them a new loan! As crazy as it sounds, it helped banks to report less of their total assets as NPAs, since the new credit would cover pending installments of the borrower’s previous loan. Then there was the issue of borrowers overleveraging, i.e. taking multiple loans using different IDs from various lenders and then failing to honor any of them. The consequence? Banks and NBFCs end up with massive NPAs. Data from credit bureaus suggests that over the last quarter, there was a 17.2% rise in the number of borrowers who had 5 or more active loans at the same time. <h2>Growth &gt; Caution</h2>It's an age-old tale unfolding yet again in India’s banking sector- Icarus flew too close to the sun and eventually, fell to its death. Between April and June 2024, NBFCs microfinance portfolio jumped by 2.7%. If you see this in terms of loan sources, microfinance loans issued by banks grew by 11.2% in Q1FY25. But the same portfolio in NBFCs swelled by almost double-23.9%. While most of these loans had an average ticket size between Rs 30,000-50,000, there was a sharp spike in the number of loans that had a ticket size of Rs 80,000 or more. Data suggests that as of March 2024, more than 12% of all microfinance borrowers had over 4 or more active loans. In dating parlance, this is a classic case of borrowers going polyamorous, minus the honesty and transparency. Not the best of situations, you'd agree! <h2>Will banks and NBFCs stand up to this stress?</h2>If their results for Q2FY25 are to be believed, NBFCs are not handling the pressure all that well. Or even slightly well. Only a few banks like Bank of Baroda (BoB), ICICI, and Indian Bank were up for the battle, even witnessing a decline in their loan delinquencies. Some others, like IndusInd Bank, saw their stock dip by a massive 16.2% over the last 5 days. Its slippages in the previous quarter burgeoned from Rs 15.3 billion in Q1FY25 to Rs 17.9 billion in Q2. As a result, the bank pushed a staggeringly high amount of money to create an NPA cushion for itself. While its management has highlighted its preference for secured lending, that was hardly reflected in its actions during the quarter, where growth in unsecured personal loans remained exceptionally high at over 7% on a QoQ basis. Turns out, only 44% of customers in IndusInd Banks’ microfinance loan portfolio were exclusive to it. The rest 47% were, you guessed it right-polyamorous! 27% had borrowed from another lender as well, apart from IndusInd Bank, while 20% were those who had outstanding loans with two other lenders, apart from IndusInd Bank. IndusInd Bank’s credit card segment did not miss the NPA bus and accounted for 7-8% of its GNPAs. Canara Bank’s total slippages during the previous quarter jumped to Rs 11.1 billion, up by 24.7% QoQ, and making up for 3.6% of its total loans. As for Bandhan Bank, its <keyword id="763994" type="General" weightage="20" keywordseo="Gross-NPA" source="Orion">gross NPA</keyword> for Q2FY25 inched up on a QoQ basis, up from 4.23% in Q1, to 4.68% in the second quarter. <keyword id="62152" type="General" weightage="20" keywordseo="IDFC-bank" source="Orion">IDFC Bank</keyword>’s heavy provisioning for its NPAs marred its profits significantly, causing its PAT (profit after tax) to dip by 73% on a YoY basis. Data from ICRA Analytics suggest that the AUM (asset under management) growth in microfinance loans and unsecured (personal and business) loans by the NBFCs will moderate to 10-12% and 19-21%, respectively, in FY2025 compared to 30% and 38%, in FY2024. Says A M Karthik, Senior Vice President &amp; Co-Group Head, Financial Sector Ratings, ICRA, “As bank funds constitute a larger share in the overall funding of NBFCs, a slower credit flow from banks to the NBFCs will compress their AUM growth. The NBFCs in unsecured and digital lending businesses shall face a higher squeeze in funding compared to others, and the unsecured lending space will continue to be a source of stress in the near term.” There has been uninhibited growth in unsecured loans, apart from just the microfinance segment. For instance, Axis Bank’s gross slippages jumped by Rs 4,443 crore, largely thanks to its unsecured business. The same is the case with Yes Bank, which saw 35–40% of its retail slippages emerging from the unsecured loan portfolio. Kotak Mahindra Bank was also quick to follow Yes Bank’s suit, with around 35%-40% of its slippages coming from credit cards. <h2>How is the road ahead?</h2>While RBI has just cracked its whip and served a warning at the moment, experts at Morgan Stanley believe that more changes (read regulatory lashes) are underway. Moreover, with both festive and wedding seasons underway in our country, unsecured lending might pick up momentum, much to the disdain of the calibrated approach banks have been taking towards it so far. But if the situation doesn't improve, RBI will not waste any time in becoming the typical tyrannical Bollywood headmaster who runs his dominion with an iron fist and takes things (and ceiling rates) into their own hands. However, that's a story for another day.

Is the lending party over? The dangerous tango of Indian banks with microfinance and unsecured loans

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Tyson's finance chief is out of the job. The Tyson heir got the gig at 32, making him the youngest Fortune 500 CFO.

Shubhangi Goel

Is the lending party over? The dangerous tango of Indian banks with microfinance and unsecured loans

Ira Alok Puranik

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