The collection efficiency in the microfinance sector, which includes microfinance institutions and small finance banks (SFBs), has increased to 93% in July 2017 from a low of 87% in December 2016, credit ratings agency Icra said on Monday. The improvement has been seen across the affected districts except the Vidarbha region of Maharashtra, and fresh slippage of loans into delinquency has been arrested, Icra said. Entities with concentrated operations in certain districts of western Uttar Pradesh, parts of Madhya Pradesh, the Vidarbha region of Maharashtra and North Karnataka faced a sharper dip in asset quality following demonetisation, it said.
Based on the recovery trends, it is expected that 70-75% of the portfolio delinquent for more than 90 days will be written off. The credit costs for the industry is likely to be in the range of 5.5-8% for FY18, Icra said. The extent of impact will differ among MFIs on the basis of share of their portfolio in impacted geographies, their client engagement, field discipline, collection frequency, IT systems and appraisal mechanisms, and pro-activeness in curtailing operations in overheated areas.