This, coupled with rising inflation and rising borrowing costs after April, which once again slowed repayment collections, put lenders at the bottom of the pyramid customers on a difficult wicket. Most NBFC-MFIs have increased their lending rates by 150-250 basis points following the Reserve Bank of India’s move to deregulation from April. Inflation, as measured by the Consumer Price Index, remained above 7% for three consecutive months.
despite the high sticky debtFlexibility in setting lending rates will help revive profitability for NBFC-MFIs,
ratings said last week.
“Many NBFC-MFIs have increased their lending rates by 150-250 basis points. It provides reasonable headroom to absorb the high borrowing cost. Lenders can take a dip in their contingency provision buffer created to manage asset-quality challenges in the last two financial years, said Krishnan Sitaraman, senior director, Crisil Ratings.
However, the high level of sticky loans has reduced the odds on further write-offs by lenders in the future. According to CRIF data released on Wednesday, write-offs increased to 4.8 per cent at the end of March, from 4.4 per cent of the total portfolio three months ago.
In a recent interview to ET,
Managing Director Ittira Davies said microfinance lenders are dealing with a portfolio with a volatile level of risk and rising inflation will delay its recovery.
Bandhan Bank, for which microfinance loans constitute nearly half of its total portfolio, saw its collection efficiency fall to 91% at the end of June compared to three months earlier.
As per the latest report by CRIF High Mark, the portfolio’s share remained outstanding for the last 91-180 days, which stood at 2.7% as compared to 3.7% three months ago. Tamil Nadu, West Bengal, Maharashtra, Madhya Pradesh, Odisha and Kerala have high viscous portfolios for more than 90-180 days above the industry average, while Bihar, Karnataka and Uttar Pradesh have this ratio less than 2%.
The portion of the portfolio at risk fell for more than 90 days as compared to three months ago due to the expansion of the portfolio. Improvement in repayment collection was mostly seen in the lower offense brackets.