Credit and Finance for MSMEs: The microfinance sector has recorded a growth of 111 per cent in disbursements to Rs 57,842 crore in the first quarter of the current financial year from Rs 27,328 crore during the same quarter last year, said self-regulatory body for the microfinance sector Sa-Dhan. However, Q1 disbursements dipped around 35 per cent from Rs 89,603 crore during Q4 FY22 as lenders were fine-tuning their disbursement policy as per the new regulations, the association said in its quarterly report.

Banks led the disbursement tally with Rs 15,111 crore loans disbursed during the quarter followed by NBFC microfinance institutions (Rs 6,678 crore), small finance banks (Rs 3,564 crore), NBFCs (Rs 1,518 crore), and not-for-profit MFIs (Rs 457 crore). 

“The sector has overcome the difficulties of pandemic and is now on track. Although it was busy in implementing the new RBI regulations during Q1, it has clocked a healthy growth. Though funds flow to the sector has improved, but still some smaller MFIs find it difficult in accessing funds from banks. We are working towards removing this gap,” said Jiji Mammen, ED & CEO – Sa-Dhan. 

The average ticket size (ATS) also increased to Rs 39,804 in Q1 FY23 from Rs 35,706 in Q1 FY22. NBFCs had the highest ATS of Rs 44,420 even as it had declined quarter-on-quarter (QoQ) from Rs 46,539 in Q4 FY22. Banks’ QoQ ATS had also dropped to Rs 37,743 from Rs 39,260.

Overall, the microfinance sector saw 24 per cent growth in credit portfolio during the first quarter from the year-ago period, resonating with the overall mood of the country’s economy, the report noted. Barring banks, portfolios of all lenders recorded double-digit growth. While NBFCs showed significant growth of 54.62 per cent, NBFC-MFIs, SFBs and NFPs recorded growth of 35.18 per cent, 27.66 per cent, and 20.71 per cent respectively. 

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Importantly, while the recovery also improved and hit almost 99 per cent in some states during the quarter, the overall sectoral NPA was around 12 per cent (amounting to Rs 33,000 crore) as of the end of June 2022. For NBFC-MFIs, the NPA rate was 9 per cent.

Meanwhile, the portfolio quality in all buckets was more or less the same as last quarter, the report added. Portfolio at risk (PAR) 30+ days past due and PAR 90+ days past due improved to 5.07 per cent and 1.88 respectively in Q1 from the previous quarter. On the other hand, PAR 60+ and PAR 180+ deteriorated to 3.60 per cent and 9.92 per cent respectively.

The Reserve Bank of India in March this year had announced new guidelines for NBFC-MFIs that included the removal of the interest margin cap on lending rates. This would help lenders adopt risk-based pricing and support their profitability, Crisil had said in a statement. 

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