The microfinance sector disbursed loans of up to `49,788 crore during the first quarter of the current financial year, a jump of 89% year-on-year. With this, the gross loan portfolio (GLP) of the microfinance industry improved by 18% to `286 trillion as of June 30.

Bad loans or repayment delinquency of over 90 days is seen in 2.2% of the total portfolio, which fell by 50 basis points (bps) on a sequential basis and 110 bps y-o-y, as per a report by credit bureau CRIF High Mark Credit Information Services. However, write-offs by microfinance lenders increased to 5.7% as of June 30 from 4.8% as of March 31.

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The collection efficiency of the lenders has improved with a decrease in monthly forward flow rates in June all delinquency buckets except 31-90 days. This was mainly because of increase in forward flow rates for banks and NBFC-MFIs. Monthly Roll-back rates for 31-90 day default bucket decreased from March onwards.

In terms of number of loans, the lenders issued 125 lakh loans in Q1FY23, up 67% y-o-y. Tamil Nadu topped in terms of growth in GLP among the top 10 states on a sequential basis. The top states contribute to 84% of the total portfolio covered by the bureau. 

The volume of inquiries increased to 19.8% in July 22 with new-to-credit inquiries comprising around 30% of the total.

With respect to lender share, banks continued to dominate the market with a portfolio share of 35.6% amounting to a book size of `1.01 trillion followed by NBFC microfinance institutions (MFIs) with a 34.1% share and small finance banks having 17.6%. Small finance banks, most of which were microfinance lenders earlier, are looking to diversify into other segments to reduce their exposure to the unsecured lending.

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Loans of ticket size from `30,000 to `50,000, which is the largest segment, improved by 16% y-o-y while a decline was seen in the lower ticket size loans. Of the total loan book, 45% of banks’ portfolio comprised of loans of ticket sizes less than Rs 50,000, against 27.2% for NBFC MFIs and 31.3% for small finance banks.