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Nabard raises concern over rising NPAs in SHG lending

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On the one hand, the number of self-help groups (SHGs) obtaining a loan from banks has been coming down over the years, indicating weakening of the movement in India. On the other, increasing bad loans from are keeping commercial banks from lending to them.

The National Bank for Agriculture and Rural Development (Nabard) has already raised an alarm over rising non-performing assets (NPAs) in SHG lending, in

its recent report called Status of Microfinance in India, 2011-12.

The number of SHG borrowers declined by around four per cent, from 11.96 million to 11.48 million between March 2011 and March 2012, according to the report. Also, in percentage terms, the gross NPA from SHGs increased from 4.72 per cent as on March 2011 to 6.09 per cent as on March 2012.

However, the amount of fresh loans issued to SHGs by banks rose 13.70 per cent to Rs 16,535 crore in 2011-12, against Rs 14,548 crore in the previous year.

The report points out the cautious attitude of commercial banks towards SHGs. While commercial banks accounted for 63 per cent of the savings of the SHGs, their share in fresh lending against total lending to SHGs was just 60 per cent. In contrast, while regional rural banks had a savings share of just 20 per cent from SHGs, their share of fresh lending to them was close to 30 per cent.

“What causes more concern is the fact that the number has been declining over the past three years, although the rate of decline has come down from nearly 24 per cent to four per cent this year,” the report said.

Moreover, the number of SHGs having loans outstanding against banks declined by nine per cent during the year to Rs 43.54 lakh, against Rs 47.87 lakh in the previous year.

All states barring Karnataka, Puducherry and Himachal Pradesh recorded a decline in the number of SHGs.

In absolute terms, the gross NPA against loans to SHGs increased from Rs 1,474 crore at the end of March 2011 to Rs 2213 crore in March 2012.

The gross NPA against loans to SHGs stood at Rs 2,212 crore in March 2012, against a total outstanding of Rs 36,340 crore.

“This is a matter of concern for the micro finance sector and the causes for declining recovery rate needs to be analysed and remedial action initiated urgently,” the report said.

The report also noted that commercial banks are losing interest in lending to micro finance institutions (MFIs). In the past year, fresh lending to declined by 38 per cent.

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