Banks go slow on micro loans

Despite the recovery in the microfinance space, banks have been going slow in the space, losing their share in the total portfolio.

The share of banks in the total microfinance portfolio stood at 43.90 per cent in March 2021. This came down to 40.50 per cent by December 2021 and by March 2022, it has further slipped to 39.04 per cent, as per the data of SaDhan.

In contrast, NBFC-MFIs have improved their share in the market from 31.48 per cent in the March quarter of FY21 to 35.83 per cent in the March quarter of FY22.

Banks have an exposure of Rs 102,527 crore in the MFI space as of March

2022, which was down 7 per cent from the same quarter last year. NBFCMFIs have shown significant growth of 19 per cent and not-for-profit MFIs (NFPs) 30 per cent.

Total disbursement of loans by banks in the March quarter came down to Rs 35,775 crore from Rs

46,911 crore in the same quarter of last year.

Even in the case of average ticket size (ATS), banks witnessed a decline. The ATS stood at Rs 41,777 in March 2021, dropped to Rs 40,974 by December

2021 and further to Rs

39,534 by March 2022. However, NBFC-MFIs increased their ATS from Rs 35,266 in March 2021 to Rs 38,647 by March 2022. At the industry level, ATS has moved up and both NBFCs and small finance banks too have improved their ATS.

Banks are probably worried about the upheavals in the business. While the sector is stabilising, a large section of microfinance clients was adversely affected by the loss of livelihoods, reverse migration, and volatile incomes during Covid.