The asset quality of the micro-finance portfolio deteriorated in the quarter ended June 2024 (Q1FY25) as the heatwave across the country adversely impacted the income of borrowers and collections, coupled with rumours about loan waivers, according to Sa-Dhan.
Jiji Mammen, executive director and chief executive officer (CEO) of Sa-Dhan, said the loans with 90-plus days past dues (dpd) rose to 1.2 per cent in June 2024 from 0.9 per cent in June 2023. The 90-plus dpd also saw a rise from 1.16 per cent in March 2024.
Sa-Dhan is a self-regulatory organisation (SRO) for microfinance institutions (MFIs), and the data has been sourced from credit information bureau Criff Highmark.
The asset quality of micro loans also deteriorated in other time buckets. The 30-plus dpd, for instance, increased to 2.7 per cent in June 2024 from 2.0 per cent a year ago, while 60-plus dpd slipped to 1.9 per cent in June 2024 from 1.4 per cent in June 2023, the industry body said in a statement.
Besides asset quality pressures, the assets under management (AUM) also witnessed slower growth in the first quarter of the current financial year. This was on account of various factors, including a harsh climate, like heatwaves in various regions of India, general elections, funding issues, and the overheating of credit in some geographies, Mammen said in a statement.
He said the microfinance industry’s portfolio rose by 20 per cent year-on-year (Y-o-Y) to Rs 4.33 trillion as of June 30, 2024. Sequentially, it shrunk by 2 per cent in March 2024. The growth in the portfolio is expected to moderate by 2-3 percentage points in the current financial year (FY25).
There has been a consensus among microfinance leaders on the need to slow the pace of growth. The (loan) growth will pick up but is expected to grow at a moderate pace during the year, keeping in mind the responsible lending guidelines issued by the SROs and the Reserve Bank of India, Sa-Dhan said.
The market share of micro lenders in terms of portfolio shows that NBFC-MFIs continue to account for the largest share at 40 per cent, followed by banks at 32 per cent. The Small Finance Banks had a share of 17 per cent, NBFCs at 11 per cent, and Non-Profit MFIs at 0.5 per cent.
The top five states in terms of outstanding micro loans are Bihar (Rs 65,342 crore), Tamil Nadu (Rs 57,067 crore), Uttar Pradesh (Rs 46,028 crore), Karnataka (Rs 42,313 crore), and West Bengal (Rs 38,256 crore). These top five states account for approximately 58 per cent of the industry’s total portfolio.
First Published: Aug 27 2024 | 3:57 PM IST
