Microlenders do not expect much of an impact on their collection efficiency due to floods in Assam as the deluge may disrupt borrowers’ repayment schedules in badly-hit areas only for a few weeks.
“The flood situation is not as bad as last year. Inundation is normal which happens in most years during the monsoon in Assam. Neither the government nor we have been asked to do anything special,” Manoj Kumar Nambiar, MD, Arohan Financial Services, told FE.
Nambiar said there is a “little bit of delay here and there” in repayment in badly-hit areas, but it would get adjusted in the next month.
“If there is a specific district-wise problem where we have to give customers a little bit time to repay, there would be an impact on collection efficiency. But it will get corrected in the next month. There has so far been no institutional intervention like last year. There is no moratorium or no SLBC (state level bankers’ committee) decision to offer anything like last year,” Nambiar said.
Jefferies in its recent note on Bandhan Bank said Assam floods may have a “limited impact” on the bank. Notably, Assam constituted around 8% of Bandhan Bank’s EEB portfolio (erstwhile microbanking segment) as on Q4FY23. The lender’s collection efficiency then stood at 97.3% in the state, against 98.6% in the rest of India.
“Floods will definitely cause disruption in recoveries. But, this is almost a regular feature in Assam. Our feedback says borrowers themselves are resilient to this kind of situation. So, they build up some kinds of reserves for themselves from which they will be able to make payments,” said Jiji Mammen, ED and CEO of Sa-Dhan, the industry body for microfinance lenders.
MFIs also have a policy to give borrowers some kind of a collection break or relaxation during the period of difficulties and disasters, Mammen said.
Notably, microfinance loan portfolio for all the lenders, including universal banks, small finance banks, NBFC-MFIs and NBFCs, in Assam is around Rs 6,000 crore. It came down sharply from around Rs 9,000 crore a year ago as lenders have remained cautious about taking fresh exposures as delinquency rates for micro loans are high in the state compared with other states. Also, the state government is currently implementing a mega microfinance relief scheme.