NBFC-MFIs group overtakes banks in microfinance lending

The NBFC-MFIs group has regained dominance in micro-loan delivery after a gap of nearly four years as they overtook banks in terms of outstanding loans share, data released by Sa-Dhan showed.

The portfolio size of NBFC-MFIs has grown nearly 7% quarter-on-quarter to Rs 101678 crore at the end of September, which is 37.53% of the total microfinance market.

In contrast, banks engaged in microfinance saw their total microfinance portfolio shrink 0.45% quarter-on-quarter to Rs 97998 crore, accounting for 36.18% of the market.

Small finance banks, other non-bank lenders and not-for-profit lenders have their market shares at 16.63%, 8.55% and 1.11% respectively.

Sa-Dhan, the oldest national level microfinance association, said that microfinance loan outstanding grew 1.8% quarter-on-quarter to Rs 2.71 lakh crore at the end of September from Rs 2.66 lakh crore. This reflects 20% annual growth.

However, it had earlier reported to have Rs 2.75 lakh crore loan outstanding at the end of June.

“There was some overlap in credit bureau data as of June which was cleaned up subsequently,” a Sa-Dhan official explained.

The official said that Sa-Dhan does not include loans which are delinquent for more than 180 days in the outstanding portfolio.

Incidentally, Microfinance Institutions Network, the younger association of the two, had reported the outstanding loan at Rs 2.93 lakh crore at the end of June. MFIN is yet to release September-end data.

“If the data for Q2 is any indication, the microfinance sector is on a definite growth path. After the lag due to pandemic and then change to the new regulatory framework, the sector has regained momentum and hopes to achieve greater growth in the coming quarters," Sa-Dhan executive director Jiji Mammen said.

The latest set of data from the industry body showed that while portfolio at risk (PAR) for more than 30 days dipped to 4.94% at the end of September from 5% three months prior to it, the PAR for over 180 days deteriorated to 11.02% from 10.25%.

The overall sectoral NPA however remained the same at around 13% as compared to the year-ago period position.

Recovery has improved in almost all zones compared to the previous quarter, with collections reaching above 96% in states like Uttar Pradesh, Karnataka, Bihar, Tamil Nadu and Gujarat. Collection efficiency in Assam however remained poor at around 60-70%.

Assam, the other northeastern states, West Bengal, Madhya Pradesh and Chhattisgarh have PAR 30+ higher than the national average of 4.94%, the report said.