MFIs could lose Rs 1,500 cr on foregoing moratorium interest on interest

Industry fears waiver of interest on interest would distort credit culture, may encourage borrowers who can pay to defer repayment

The microfinance industry (MFI) will lose nearly Rs 1,500 crore if it has to forgo interest on interest for six months on loan which is eligible for moratorium. 

“Interest component for the industry during the six-month moratorium on loan outstanding of about Rs 2.3 trillion comes to around Rs 27,500 crore. Of this, the component of interest would be nearly Rs 1,500 crore,” said Manoj Nambiar, chairman, Microfinance Institutions Network (MFIN).

In view of further interest payable on interest, a substantial number of rural borrowers are already on course to repay their dues. 

In June, the MFI expects to recover close to 50