MFI portfolio declines 4.3%, bad assets spike in Sep quarter: Report

Microlending outstandings in the system reduced 4.3 per cent to Rs 4.14 trillion in the September quarter as lenders adopted a cautious stance amid deteriorating asset quality, a report said on Wednesday.

Loans unpaid for 1-30 days increased to 2.1 per cent from the 1.2 per cent in June, while the ones unpaid for 31-180 days witnessed a sharper rise at 4.3 per cent as against 2.7 per cent in June, credit information company Crif High Mark said. 

The microlending universe is facing multiple headwinds for the past several months, and the regulator has blamed industry practices, including multiple lending to the same borrower by different entities and charging usurious interest rates with a view to expand profits as among the problems.

The last few months have seen a drop in collection efficiencies, and the industry has swung into action with corrective steps that are leading to a dip in the overall outstandings.

Data from the credit information company said only non-banking financial companies (NBFCs) grew their portfolio in the September quarter, registering a 0.7 per cent quarter-on-quarter growth, while all others, including banks and small finance banks, saw a decline.

Delinquencies spiked across ticket sizes and lender types, particularly in the top 10 states, it said, adding that Bihar, Tamil Nadu, Uttar Pradesh, and Odisha accounted for nearly two-thirds of the incremental bad loans.

In what can be seen as a positive development for the sector, there has been a decrease in the number of borrowers having three or more active loans during the September quarter, the data said.

In terms of exposure of microfinance borrowers to retail loans, 14.3 per cent of live MFI borrowers have an active retail loan as of September, and 37 per cent of these borrowers are among those who have not paid the retail or MFI loans for over 30 days, the data said.