NBFC-MFIs show moderation in leverage for three consecutive quarters

The leverage of non-banking financial companies (NBFCs), which are working as microfinance institutions (MFIs), has improved for three consecutive quarters, from 3.5 per cent in March 2019 to 3 per cent in December 2019, on the back of a rise in outstanding equity capital.
 
During the December quarter (Q3FY20), NBFC-MFIs received a total of Rs 10,960 crore in debt funding, up 16 per cent from Q2FY20. Total equity grew 8 per cent during the same period and is at Rs 15,567 crore.
 
Harsh Shrivastava, chief executive, Microfinance Institutions Network (MFIN), said capital inflows are rising in the NBFC-MFI segment which is doing better financially — a sign of healthy profile.
 
The funds were not available to small MFIs in the aftermath of Infrastructure Leasing & Financial Services (IL&FS) crisis in 2018. The funding support, especially from banks, to finance companies improved in the last 12 months after the Reserve Bank of India and the government took various measures to improve liquidity.

The MFIN data shows that the outstanding borrowings at the end of each quarter of the current financial year have grown. The outstanding borrowings increased from Rs 38,760 crore in March 2019 to Rs 47,269 crore in December 2019.
 
The Asset Liability Management (ALM) analysis shows that all sizes of NBFC-MFIs are well placed in terms of ALM across various buckets. The borrowings of MFIs are of longer term while assets are of shorter term, and as a result, they have a comfortable gap as on December 30, 2019 to manage their obligations for the upcoming quarter and up to the next 12 months.
 
The equity also showed a rising trend in 9 months ended December 2019. The net worth of NBFC-MFIs rose from Rs 11,055 crore in March 2019 to Rs 15,567 crore in December 2019. The investors have a positive outlook on the sector as growth potential in this segment is high and asset quality profile is better, though an increase in dues was seen in the third quarter, analysts said.