We interacted with several MFIs, both private and public, to get an update of the situation on the ground. There is a visible improvement in most stressed states, barring Maharashtra. Our interactions with managements suggests that collection efficiency in UP has largely returned to 98%+ levels from the 30-40% levels a few months ago. 90dpd overdues, too, have reduced to sub-15% levels. The situation in Maharashtra still remains grim with 90dpd overdues at 17-20%. The pace of disbursements has picked up in most geographies and is expected to reach pre-demonetisation levels in 3-6 months on improving collection efficiency.
Collections stabilising in key states: Collection efficiency in Uttar Pradesh is back to 98-99% levels. Other major states like Karnataka and MP are also displaying much improved collection trends. PAR >90dpd in most troubled states, including UP, has dropped to below 15%. However, Maharashtra continues to witness significant delinquency pressures. Several companies confirmed that the next six months could remain a difficult period, particularly in Maharashtra. While our interactions with the companies suggest minimal/zero impact of farm loan waivers, we would like to observe the delinquency trends for a few more quarters.
Disbursements improving on the back of client intent and repayments: We believe repayments and improved collection trends have increased the confidence of companies to start disbursing loans at a healthy pace again. While group discipline is still considered low, some companies mentioned that attendance in centre meetings is improving. While several emphasised that all customers had started paying again in these group meetings, we take this with a pinch of salt, considering that our checks suggested that collection officers had to visit clients individually to recoup money. Continuous stakeholder engagement crucial: MFIN has been rigorous in initiating engagements with the government, local bodies and the RBI. It has engaged in awareness campaigns, press notices and extensive media advocacy.
This has helped control the domino effect of trouble in one state spreading to others. Several companies also emphasised that they had spent significant sums on campaigns to educate customers about the importance of credit history.