NBFC micro credit biz sees near-term stress

The share of loans with over 30-day dues in micro credit by finance companies shot up 15.7 per cent in June 2021 from 4.5 per cent a year ago, showing adverse impact of Covid-19 on borrowers.

Sequentially also, there was a rise from 9.2 per cent in March 2021, according to Microfinance Institutions Network (MFIN) data.

The review of performance by MFIN showed there was a marginal rise in over 90-day dues to 2.81 per cent in June 2021 from 2.3 per cent in June 2020, a quarter marked by the first wave of the pandemic.

However, sequentially, there was improvement from 5.4 per cent in March 2021.

Finance company executives said the second wave had an adverse effect on the incomes of borrowers. Also, collection work by staff was hampered due to localised lockdowns imposed to curb the spread of Covid in Apriljune 2021. Now, with the easing of restrictions and increase in economic activity, collections have improved and people have started to pay-off part of their dues. This is reflected in the dip in the 90day plus dues category.

Non-banking financial companies-micro finance institutions (NBFC-MFIS) disbursed loans worth ~6,511 crore in Q1 of FY22 (through 1.79 million accounts), as compared to just ~561 crore disbursed in Q1 of FY21 (0.2 million accounts). However, the disbursements in Q1 of FY22 were way below the ~26,153 crore disbursed in January-march 2021.

Gross loan portfolio (GLP) of NBFCS, which work as MFIS, rose by 6.9 per cent to ~76,237 crore as on June 30, 2021, from ~71,301 crore as on June 30, 2020. The GLP was ~81,431 crore at the end of March 2021.

The GLP in June 2021 included an owned portfolio of ~65,206 crore and a managed portfolio of ~11,031 crore.

As of June 30, 2021, NBFCMFIS, on an aggregate, have a network of 15,066 branches with 122,024 employees.