Credit costs of MFIs may surge up to 10% by March 22, says Ind-Ra

With a sharp drop in collections during the second wave of Covid-19, the credit costs of micro-finance institutions (MFIs) in India may surge to 6-10 per cent by March 2022 from an earlier estimate of 3-6 per cent.

However, most of the large MFIs would be able to absorb this through their income statement, with minimal impact on equity, according to rating agency India Ratings (Ind-Ra).

In May 2021, the rating agency had predicted that overall the microfinance sector’s collections could drop by a cumulative 10-15 per cent during the month compared to March 2021. However, the collection lag in the second