Micro-credit collections in East, N-E lagging national average
Double whammy of Covid-19 and natural calamities affecting repayments
Kolkata, October 16
Repayments by microcredit borrowers in the eastern and north-eastern regions, hit by a double whammy of the Covid pandemic and natural calamities, are currently lower than the national average.
According to available estimates, the collection efficiency in the eastern and north-eastern region is lower by 5-6 percentage points compared to the national average.
“After the end of the moratorium (in August), the performance (of this region) has been encouraging, but due to several reasons it is not at par with some of the other well-performing States. There are also some local-level disturbances (which are impacting collections). September was the first month after moratorium, so we still don’t have the data ready. But based on what we are hearing from institutions, it is currently lower by about 5-6 percentage points,” Alok Misra, CEO, Microfinance Institutions Network (MFIN), told BusinessLine.
The overall collection efficiency in the microfinance sector has improved to around 85 per cent as of September-end, up from around 75-80 per cent in August. However, collections in the East and North-East still hover at around 78-80 per cent. While Cyclone Amphan swept West Bengal and parts of Odisha, Bihar and Assam were affected by torrential rain and floods.
It is to be noted that East and North-East together account for nearly one-third of the total NBFC-MFI portfolio, which was ₹72,170 crore as on June 30. The region accounts for 34 per cent of the total microfinance book, followed by South (25 per cent), North (15 per cent), West (15 per cent) and Central India (11 per cent), as per MFIN data.
Increase in NPAs
The MFI industry, which has been used to 98-99 per cent collection efficiency, could witness a spike in NPAs if collections do not improve.
The current quarter would be “very critical” and the focus of most companies would be to get the accounts activated by asking customers to pay at least a portion of their instalment, said Manoj Kumar Nambiar, Managing Director, Arohan Financial Services Ltd.
However, Chandra Shekhar Ghosh, Managing Director & CEO, Bandhan Bank, feels the region may come back to normal by the end of this quarter and collections would be at par with the national average.