Kolkata: The severe heat wave in North India and the two-month long general elections have led to a sequential squeeze in the country’s microfinance sector for the first time in 12 quarters with the sector’s outstanding gross loan portfolio shrinking to Rs 4.33 lakh crore at the end of June from Rs 4.42 lakh crore three months prior to that.
Funding constraints and over-heating of credit in some geographies have also dented the growth momentum, microfinance industry association Sa-Dhan said, citing data from credit information company Crif High Mark.
An overall deterioration in the recovery position has also been observed with the cumulative portfolio at risk (PAR) for over 90 days rising to 1.2% from 0.9% a year back.
ET had on August 21 reported about the build-up of fresh stress in the microfinance market, also due to over-lending to the bottom of the pyramid customers, besides seasonal factors.
The first quarter of the current financial year witnessed a slowdown on account of several factors including a harsh climate like heat waves in various regions of India, general elections, funding issues and also overheating of credit in some geographies, Sa-Dhan executive director Jiji Mammen said.
“The growth is expected to be moderate during the year,” he said, adding that microfinance leaders have consciously slowed the pace of business expansion amid fresh asset quality stress looming the sector.
The microfinance market grew every quarter since June 2021 withstanding the Covid-related stress till March 2024, data from Sa-Dhan showed. The gross loan portfolio stood at Rs 2.42 lakh crore as on June 30, 2021.
The microcredit outstanding as of end June 2024 was however about 20% higher year-on-year basis.
There has been deterioration in the portfolio quality under all buckets except 180+ days passed due (DPD). Portfolio at risk for over 30 days rose to 2.7% at the end of June from 2% a year back while portfolio at risk for over 60 days slipped to 1.9% from 1.4%. In contrast, portfolio at risk for over 180 days improved to 9.1% from 9.7%, Sa-Dhan said.
The NBFC-MFIs continued to occupy the largest share of the pie with 40%, followed by banks at 32% and small finance banks at 18%.
