Microfinance loans grow 21.3% YoY to Rs 3.5 trn in FY23, says report

New regulatory norms have helped industry clocking robust demand

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Microfinance loans in India increased 21.3 per cent year-on-year (YoY) at Rs 3.5 trillion in Financial Year 2022-23 (FY23), backed by revised regulatory norms and higher demand.

Asset quality profile improved with loans due in more than 90 days dipping to 1.06 per cent in March from 2.43 per cent a year ago, according to industry group Sa-Dhan.

Numbers suggest that the microfinance industry has come out of the impact of Covid-19 and is on a growth path, said Jiji Mammen, executive director and chief executive officer at Sa-Dhan.

New regulatory norms have created a level-playing field and it is reflected in the growth of the portfolio of non-banking finance companies and NBFC working as micro finance institutions (NBFC-MFIs).

The NBFC MFI group posted 37 per cent YoY growth in portfolio at Rs 1.39 trillion. Small finance banks posted a 19.03 per cent growth at Rs 58,431 crore of lending book. The NBFC group recorded 49 per cent YoY growth at Rs 29, 664 crore at end of March 2023. Banks recorded paltry 3.22 per cent growth in portfolio at Rs 1.2 trillion crore.

The microfinance industry’s number of loan accounts increased 10 per cent YoY to 13.6 million in FY23, from 12.39 million in FY22. Lender wise figures show NBFCs registered the highest y-o-y growth (23 per cent), followed by NBFC-MFIs (15 per cent), banks (6.0 per cent), and SFBs (5.o per cent) respectively. Sa-dhan said.

The microfinance sector’s portfolio quality significantly improved in FY23. The quality, as measured in portfolio at risk (PAR), has improved under all buckets. For instance, loans in the 60-days-plus dues (DpD) category declined to 1.67 per cent from 3.55 per cent a year ago. In the 30 DpD category, improvement was much more prominent with a decline to 2.16 per cent in March 2023 from 5.27 per cent a year ago.