Asset quality pressures on micro-lending ease in Q2Fy22: CRIF High Mark

The gross loan portfolio in microfinance rose by 2.1 per cent growth at Rs 2.49 trillion at end of September 21.

Reflecting a turnaround in the microfinance space, asset quality pressure eased sequentially with loans in the 30-plus day passed dues (DPD) bucket, declining to 10.4 per cent in the quarter ended September from 15 per cent in April-June. 

However, the 90-plus DPD remained stable at 3.3 per cent in the July-September period, similar to April-June, according to credit information bureau CRIF High Mark.

While the 30-plus DPD was 9.5 per cent in March 2021, it was 4.4 per cent for the 90-plus DPD bucket in the same month. This cannot be compared with the September 2020 numbers because of the moratorium granted on repayments for March-August 2020 due to the adverse effects on the first Covid wave. It is also because the Supreme Court had granted interim stay on labelling accounts as non-performing loans.

Gross loan portfolio (GLP) in the microfinance sector in India rose by 2.1 per cent to Rs 2.49 trillion at the end of September 2021 from Rs 2.43 trillion at end of June 2021. 

This came after nearly seven per cent quarter-on-quarter decline in the previous quarter (Q1 of FY22), which was marked by adverse impact of the second wave. The GLP was Rs 2.61 trillion in March 2021.

The year-on-year (YoY) growth in GLP was six per cent as of September 2021. The GLP was at Rs 2.35 trillion as of September 30, 2020. The urban as well as rural regions showed sequential rise in GLP in Q2 of FY22 compared to Q1 of FY22, a sign of broad-based recovery in economic activity.

Not only small businesses but also microfinance institutions lending to such businesses suffered great losses due to the second wave in Q1 of FY22. 

While the effects continue to linger, the second quarter marked a turnaround for the microfinance industry with increase in disbursements. However, lenders still need to be cautious about asset quality, CRIF said in a review.

Signalling a scope for fresh business, CRIF data showed that new-to-credit (NTC) enquiries between July 2021 and September 2021 were in the range of 18-20 per cent. NTC enquiries went up to 24 per cent in October 2021.