Business Companies 08 Nov 2022 Up to 10% credit los ...

Up to 10% credit losses for MFIs in COVID years

FINANCIAL CHRONICLE | FALAKNAAZ SYED
Published Nov 8, 2022, 1:30 pm IST
Updated Nov 8, 2022, 1:30 pm IST
Small loan specialists that cater to people without bank accounts suffered credit losses of up to 10 per cent during the two years of the Covid  (Representational image.)
 Small loan specialists that cater to people without bank accounts suffered credit losses of up to 10 per cent during the two years of the Covid (Representational image.)

Mumbai: Small loan specialists that cater to people without bank accounts suffered credit losses of up to 10 per cent during the two years of the Covid pandemic, but recovered with stressed asset levels halving with the economy opening up.

At a virtual press meet of the Microfinance Institut-ions Network (MFIN), its CEO and director Alok Misra said the cumulative credit losses for microfinance institutions (MFIs) were 5-10 per cent during the two pandemic-hit years of FY21 and FY22.

The exact extent of the credit losses may vary from institution to institution, he added.

However the pandemic related defaults have ebbed considerably he said.
"The portfolio at risk (loans unpaid for over 30 days) has fallen to 10-11 per cent in July 2022, from the peak of 22 per cent (during the second wave of the pandemic), he said.

The head of the self-regulatory organisation said that in FY22, the overall portfolio of 100 lenders including dedicated NBFC-MFIs, banks which do microlending and small finance banks, grew to Rs 2.85 lakh crore, adding that this is a huge jump when compared to Rs 16,000 crore a decade ago.
Misra said its study suggested that the potential market size will reach Rs 17 lakh crore in FY25.

Speaking at the event M. Rajeshwar Rao, deputy governor, Reserve Bank of India, said while microfinance is present in almost all nooks and corners of the country, in terms of geographical distribution, 82 per cent of the loan portfolio is concentrated in ten states.

In terms of regional distribution, eastern and north-eastern regions have the largest share at 37 per cent followed by the south at 27 percent and west at 15 per cent....Hopefully, going forward the spread could be diversified,” Rao said.

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