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Assam flood: Implementation of mega microfinance relief scheme getting delayed

“Collection efficiency in terms of full and partial repayments had stood at around 75-80% before the flood in Assam, while on pan-India basis it had been over 90%. In the last one month, collection efficiency has further dropped in the state due to the flood,” said Nambiar.

As many as 2.9 million people have been affected across 30 districts.
As many as 2.9 million people have been affected across 30 districts.

Implementation of the Assam government’s mega microfinance relief scheme is getting delayed due to the devastating floods. Because of the deluge, the state government and the lenders could not move ahead with the second phase of the scheme, where the government will pay the overdue amount of delinquent customers to make them regular.

The Himanta Biswa Sarma-led government had rolled out the special one-time relief to the microfinance borrowers in November last year by distributing cheques to the segment of the state’s microfinance customers (Category 1), who had been regular in loan repayments, to provide them incentives in the first phase of the scheme. Implementation of this phase got completed by April-end.

For the implementation of the second phase of the scheme, the lenders submitted the data on the customer category, where borrower accounts are flagged as overdue but not classified as non performing assets (NPAs), to the government in May. “Category 2 was supposed to be completed by June or July. Unfortunately, because of the floods we could not move ahead. In the last one month nothing has happened. Now, we would start, where overdue amounts of the delinquent customers will get paid to the lenders,” Manoj Kumar Nambiar, MD, Arohan Financial Services, told FE. Total customers under Category 2 is around 0.3-0.4 million, while that of Category 1 was about 1 million.

In the third phase, for the customer category (Category 3), where borrower accounts are classified as non performing assets (NPAs), the NPA amounts will be considered to be paid by the government. Total customers under Category 3 would be about 1.5 million.

Announcing this special one-time relief in June, 2021, the government had committed to providing the special one-time relief of up to Rs 8250 crore to the microfinance borrowers affected by the Covid-19 pandemic.

Notably, microfinance loan portfolio for all the lenders, including universal banks, small finance banks, NBFC-MFIs & NBFCs, in Assam is currently around Rs 9,000 crore. It came down sharply from Rs 12,500 crore earlier as the lenders had been focusing on collections rather than fresh lending as delinquency rates for micro loans are high in the state compared with other states.

“Collection efficiency in terms of full and partial repayments had stood at around 75-80% before the flood in Assam, while on pan-India basis it had been over 90%. In the last one month, collection efficiency has further dropped in the state due to the flood,” said Nambiar.

NBFC-MFIs have approached the State Bank of India (SBI), the convenor of the State Level Bankers’ Committee (SLBC) for Assam, to convene a meeting as the microfinance sector in the state has been badly hit due to the drastic fall in collection efficiency owing to floods. The NBFC-MFIs have written to the SBI to convene an SLBC meeting to offer loan moratorium facility to the borrowers affected by the floods. “For a natural calamity situation there is an RBI dispensation that once the SLBC declare it as a natural calamity, customers have the ability to request for a 30 days, 60 days or maximum 90 days moratorium on repayments,” Nambiar added.

The flood situation continues to remain grim. As many as 2.9 million people have been affected across 30 districts. Several major rivers in the state including the Brahmaputra continue to flow above the danger mark.

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