With the microfinance sector in Assam being badly hit due to a drastic fall in collection efficiency owing to devastating floods, non-bank microfinance institutions (NBFC-MFIs) have approached the State Bank of India (SBI), the convenor of the State Level Bankers’ Committee (SLBC), to convene a meeting to extend loan moratorium facility to the affected borrowers.
“Collections have been impacted in flood-affected areas as microfinance officials are not able to collect repayment collections from the borrowers. Officials are unable to reach the flood-affected areas,” Manoj Kumar Nambiar, MD, Arohan Financial Services, told FE.
Nambiar said NBFC-MFIs have written to the State Bank of India to convene an SLBC meeting. “For a natural calamity situation, there is an RBI dispensation that once the SLBC declares it as a natural calamity, customers have the ability to request for 30 days, 60 days or maximum 90 days moratorium on repayments. SLBC has to document with the state government and the banking community that it is a natural calamity and customers need help. Then the RBI dispensation will come into effect,” he said. Currently, there are as many as 39 NBFC-MFIs (non-banking financial companies-microfinance institutions) in the state.
According to Nambiar, even before the flood, collection efficiency for microfinance loans in Assam was much lower compared to other states. “In Assam, collection efficiency in terms of full and partial repayments had stood at around 75-80% before the flood, while on a pan-India basis it had been over 90%. In the last one month collection efficiency has further dropped in the state,” he added.
Notably, Microfinance loan portfolio for all the lenders, including banks and small finance banks, in Assam is currently around Rs 9,000 crore.
“People in Assam normally face floods and cyclones. These types of natural calamities generally impact microfinance collections for two-three weeks. After that things become normal. In the current situation, microfinance customers are not defaulters as officials are unable to reach them,” a microfinance industry source told FE.