Microfinance firms brace for write-offs of Rs 5,000 crore

Debt waiver schemes announced by state governments pull down recovery

The microfinance sector is bracing to write off close to Rs 5,000 crore as bad loans, on account of debt waiver schemes by state governments.

This excludes write-offs by small finance banks-commercial banks and non-MFI non-banking finance companies (NBFCs).

“We estimate the amount of write-offs to be Rs 4,000-5,000 crore. Anyone who has defaulted would not get a fresh loan. In several parts, defaulters have even stopped coming to group meetings, which makes recovery even more difficult,” said Ratna Vishwanathan, chief executive officer, MFIN (Microfinance Institutions Network).

Of the amount stuck as bad loans, the biggest defaults are in Vidarbha district of Maharashtra,