Credit and finance for MSMEs: While credit to the microfinance sector in the country is growing at a steady pace with all types of lenders recording stable loan growth, the stress level in the loan portfolio has also gone up, according to the Reserve Bank of India’s December 2022 Financial Stability Report. “Overall delinquency in the microfinance segment, measured in terms of 90+ days past due (loans overdue by more than 90 days) has increased, led by banks,” the report said. Being delinquent in banking is referred to a situation wherein the borrower is overdue on a loan payment by a certain number of days.
The overall delinquency in the microfinance portfolio by over 90 days as of September 2022 involving all lenders was around 14 per cent, up from around 12 per cent in March 2022 even as it was similar to September 2021 level, data showed. Microfinance loans are typically extended to small business owners or entrepreneurs and low-income households who don’t have access to traditional financial resources.
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“It is not going up but PAR 90 of September 2022 is at a similar level to September 2021 mainly because disbursements during the second half of the calendar year 2021 were still impacted due to the second wave of Covid. However, the comforting measure is that disbursements after April 2022 have been performing well and we should see this stress again going down,” Alok Misra, CEO and Director, MFIN India told FE Aspire. MFIN is an association of NBFC-microfinance institutions and associates including banks, small finance banks (SFBs) and NBFCs.
Stress in Microfinance Segment
Year-on-year, among lenders, the 90+ DPD for banks increased to around 18 per cent in September 2022 from around 14 per cent in September 2021. On the other hand, small finance banks and microfinance NBFCs had around 12 per cent 90+ DPD during September 2022. Importantly, SFBs’ 90+ days delinquency had dropped from around 19 per cent in September 2021 while for NBFC-MFIs, September 2021 level was similar to September 2022 level.
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In contrast, NBFCs’ 90+ DPD stress declined from around 10 per cent in September 2021 to around 6 per cent in September 2022 while for microfinance institutions, the stress level stood at around 11 per cent.
According to an MFIN India report, MFI credit grew by close to 11 per cent to Rs 71,916 crore during the second quarter of the current fiscal from Rs 64,899 crore disbursed during the year-ago period. In terms of the number of loans, 1.81 crore loans were disbursed during Q2 vis-a-vis 1.85 crore loans in Q2 of FY22.
Importantly, the government’s Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), which implements the credit guarantee scheme for micro and small enterprises (MSEs), had added MFIs to the list of member lending institutions (MLIs) in December last year. MFIs can now join public and private banks, regional rural banks, foreign banks, SFBs, urban cooperative banks, and other MLIs in lending to new enterprises with credit guarantee cover.
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