Microfinance loans grow 1.18% sequentially in Dec 2020: CRIF

Disbursements are rising but repayments stress remains, says the credit bureau

After witnessing shrinkage for the two consecutive quarters, the Gross Loan Portfolio of microfinance players in India rose sequentially by 1.18 per cent to Rs 2,26,660 crore in December 2020, according to credit bureau CRIF High Mark.

As markets opened up and operations resumed in Q2FY21, disbursements have picked up pace. The digitalisation has gained recognition with more lenders in the customer onboarding stage. The loan portfolio had shrunk from Rs 2,32,200 crore in March to Rs 2,26,600 crore in June 2020 and it declined further to Rs 2,24,000 crore in September 2020.

Coming into the third quarter of current financial year (Q3FY21), disbursements further increased, striding towards pre-pandemic levels.  One out of five loans disbursed in Q3FY21 is of less than Rs 10,000 due to loan restructuring and new loans given out as guaranteed emergency credit to manage pandemic induced stress.

The average ticket size of the micro-finance loan as of December 2020 stood at Rs 34,900, having grown at 0.6 per cent over the previous quarter.

Among the top three states, the average ticket size of microfinance loan in West Bengal and Bihar stood higher than the national average, while that in Tamil Nadu stood lower.

While sequentially, things on disbursement front showed better picture, the dues on older loans continue to be a challenge. The repayments continue to be stressed since the end of the moratorium period, reflecting adverse impact of economic disruption. The loan with dues between 30-180 days shot up to 12.7 per cent in December 2020 from 2.6 per cent in September 2020. The rate was 1.4 per cent in June 2020, CRIF High Mark said.

Credit bureau said this current disruption has had a huge impact on household incomes of individuals including a large number of microfinance borrowers leading to sub-optimal collection efficiencies for the sector.

The post moratorium period witnessed high defaults, which have continued to flow into Q3FY21. The eastern states of West Bengal and Assam, reeling from the double whammy of the pandemic and natural calamities, including flood and cyclone, have witnessed maximum repayment stress as of Q3FY21, CRIF added.