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India Gazette
27-05-2025
- Business
- India Gazette
Stress in the microfinance sector should recede over the next two quarters: Report
New Delhi [India] May 27 (ANI): The worst is over for India's microfinance sector, with stress levels posed to ease over the next two quarters, said Axis Securities in its latest report. Microfinance companies are hopeful that growth will return to normal from the second half of the financial year (FY) 2026. However, the report added that the first half of FY26 is likely to remain tough, with higher loan defaults and slower business expansion. The report says that key factors such as the ongoing impact of the Karnataka ordinance and the possible effects of a similar law in Tamil Nadu will be worth watching, which could affect lending operations. On the brighter side, secured lending such as home and diversified loans is expected to benefit from favourable conditions, helping those lenders grow at a strong pace of 24 per cent year on year between FY25 and FY27. The vehicle financiers are expected to benefit from the improved infrastructure spending, better rural incomes and improving capacity utilisation of fleet, enabling vehicle financiers to deliver a robust 19 per cent CAGR growth over FY25-27. Furthermore, the report added that despite fresh delinquency accretion peaking out, micro-financiers will continue to see elevated slippages and accelerated write-offs in the first half of fiscal 2026. 'Credit costs will continue to remain elevated for micro-financiers for the coming couple of quarters. For other financiers, we could expect asset quality improvement,' the report added. The Axis Securities report expects recovery in both microfinance and credit from H2FY26. 'we expect gradual normalisation in credit costs, thereby supporting earnings. Navigating the headwinds effectively, we expect NBFCs under our coverage to deliver an earnings growth of 23 per cent CAGR over FY25-27E, with improving credit costs being a key improvement driver,' the report added. As per Industry data the business of Micro Finance Institutions (MFIs) industry has risen from Rs17,264 crores in March'12 to Rs3.93 lakh crores as of November 2024. The microfinance industry operates in over 723 districts, including 111 aspirational districts across 28 states and 8 Union Territories. It also caters to the financial needs of almost 8 crore borrowers. MFIs contribute 2.03 per cent of the gross value added to GDP and support 1.3 crore jobs. (ANI)
Time of India
25-05-2025
- Business
- Time of India
Microfinance stress takes toll on FY25 profits
Representative image CHENNAI: Stress in the sector has left microfinance institutions bleeding. Listed MFIs have either reported a loss or a substantial decrease in their profits in the March quarter. This comes on the back of multiple factors including deterioration in asset quality, rising credit costs, borrower overleveraging and rising borrower overlaps that impacted the performance of microfinance companies during FY25. Muthoot Microfin posted a loss of Rs 401 crore in Q4 FY25 while Fusion Finance ((formerly Fusion Micro Finance) reported a loss of Rs 164 crore during the same period. Microfinance lender CreditAccess Grameen's net profit dropped by 88% to Rs 47 crore in Q4 FY25 against Rs 397 crore in the year-ago period. Satin Creditcare Network's standalone PAT in Q4 FY25 declined by 67% to Rs 41 crore from Rs 125 crore during the year-ago quarter. Mahendra Patil, founder and managing partner, MP Financial Advisory Services LLP said, the gross non-performing asset (GNPA) ratio for the sector surged to 16% at the end of FY25, up from 8.8% a year earlier, indicating a significant rise in defaults. However, the microfinance sector is projected to grow by 12-15% in FY26 under a conservative scenario, returning to FY24 levels, Patil added. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
Time of India
20-05-2025
- Automotive
- Time of India
Auto cycles, EV sparks & IT shifts: Kumar Rakesh decodes FY26's investment gears
Kumar Rakesh , Analyst – IT and Auto at BNP Paribas, shares his outlook on key trends shaping the auto and IT sectors as we head into FY26. He believes the passenger vehicle segment has likely bottomed out and is poised for a gradual recovery, supported by stabilising affordability and potential policy catalysts. Two-wheeler growth, however, may remain subdued amid tighter financing. In IT, Rakesh sees improved valuations and strong relative earnings growth making the sector attractive despite global uncertainties. He also highlights growing EV adoption—particularly in two-wheelers—as a key theme, supported by upcoming product launches and policy incentives. Let's start with the pulse of the auto sector. Where are we in the auto industry cycle, especially when it comes to 2-wheelers and 4-wheelers? We see the passenger vehicle industry to have troughed and expect a gradual growth recovery in the coming years. The last two years' growth slowdown was driven by a high base that was created post Covid by pent-up demand, and a sharp fall in affordability. While the base is normalised, our affordability index is showing that passenger vehicle affordability has largely stabilised over the last year, after having fallen considerably in the prior years. The catalyst to drive this growth recovery would be tax cuts announced in the recent budget and implementation of Eighth Pay Commission in 2026, apart from the stable affordability. For the 2W-industry, we expect the growth slowdown to continue in FY26. We have seen a sharp growth moderation in the recent months which we believe was driven by tighter financing availability. The industry had started seeing an increase in two-wheeler delinquencies resulting in a higher credit cost for the financial institutions. We have noticed a lot of the captive financing entities of the two-wheeler companies, NBFCs and MFIs, to have slowed down their disbursements in the second half of FY25 to control the rising credit cost. In the coming quarters, while we expect the credit quality to improve resulting in an improved financing availability, the industry growth may still be single digit in absence of a buoyant financing that the industry had enjoyed over the recent years. Live Events EVs have dominated the headlines, but the numbers still show ICE vehicles holding strong. Are we witnessing a long transition phase, or is the EV narrative running ahead of itself? In the passenger vehicle industry, EV penetration has been around 2% for some time, which we believe is partly a reflection of leading automotive OEMs' absence from the EV market. As they launch their EV models in the coming years, we expect the EV penetration among passenger vehicles to rise. Globally, we have noticed hybrid penetration outperforming EV penetration in recent years. As more hybrid models get launched, we could see a similar trend playing out in India as well. In the two-wheeler industry, despite lowering of demand incentives in recent years, EV penetration has continued to rise. While demand could show monthly volatility as it adjusts to changes in incentives, we believe two-wheeler customers now well understand the value proposition of EVs and we should see a structural increase in its adoption. However, for an accelerated adoption of EVs in the two-wheeler industry, we would need to see commuter and executive motorcycles also getting electrified, which currently looks like a few years away. How do you think India-UK FTA will impact some of our listed players? Most automotive manufacturing plants in the UK are of premium and luxury brands. Hence, we do not see any material impact to India-listed passenger vehicle OEMs. That said, we could see a slightly higher number of premium/luxury vehicles selling in India, which are currently miniscule. In the IT space, do you think the recent bounce in stocks has enough steam left as the Trump administration is working out trade truce agreements with major economies? We believe we are past the trough of negative news cycle related to tariffs and counter tariffs. The economic impact of these announcements are yet to fully reflect. While that is a near-term risk, the year-to-date correction in the Indian IT Services' companies' valuations has brought down their premium over Nifty50's valuation to one of the lowest levels in the last five years. However, their one-year forward earnings growth outperformance over that of Nifty is now the highest that we have seen in almost a decade. Also, the sector is trading at close to the highest dividend yield in the last decade (outside of Covid period) creating a valuation backstop. Hence, in a scenario where the US macroeconomy goes through a shallow recession and then recovers by early 2026, risk-reward balance in the Indian IT services stocks looks favourable to us. Several mid-cap IT names have outperformed the biggies lately. Is this a structural re-rating? This is a trend we have seen particularly post Covid. We believe the growth of some of the midcap IT services companies have structurally improved in the recent years. Part of the reason is enterprises breaking down large contracts in smaller projects in which midcap companies can also now participate unlike earlier. This has resulted in an increase in the addressable market for midcap IT services companies driving their growth higher. Also, some of the enterprises now prefer to bring in a good quality mid-cap IT services company as a challenger to their large-cap IT vendor, both for cost reasons as well as technological innovations. If you had to pick a theme to watch in FY26—AI monetization in IT or EV adoption in autos—what would you bet on? AI monetisation may not translate to higher revenue for IT services companies in FY26 due to macroeconomic uncertainty and cost constraints on enterprise customers. However, in EVs, we will see 1) leading passenger vehicle OEMs launching and ramping-up their BEV models, 2) multiple new EV model launches across two-wheeler OEMs and network expansion, especially post the recent listing of major EV two-wheeler start-ups, and 3) first full year of PLI incentives for EVs being available. Hence, we would expect EV adoption to continue to gain traction in FY26 and to be a key theme in the year.
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Business Standard
07-05-2025
- Business
- Business Standard
Bank spread narrows to 10-year low of 2.71% in March: CareEdge
The spread between the outstanding weighted average lending rate and the weighted average domestic term deposit rate for banks continued to tighten, narrowing by five basis points month-on-month in March to a 10-year low of 2.71 per cent, said CareEdge Ratings in its research report. It further mentioned that in March 2025, fresh spreads declined by 22 basis points to 2.70 per cent. The report highlighted that the spread on fresh loans for private banks fell by 10 basis points to 3.63 per cent and for state-owned banks fell by three basis points to 1.65 per cent, with private banks maintaining a higher spread. Moreover, the outstanding spread between lending and deposit rates for state-owned banks has also been steadily narrowing over the past year, decreasing by one basis point month-on-month to 1.93 per cent as of March 2025, also a decadal low. Similarly, private banks have witnessed a month-on-month decline of four basis points in their spread to 3.78 per cent. 'Private and public sector banks saw lending rates declining by four basis points and one basis point in March 2025, to 10.71 per cent and 9.09 per cent, while keeping outstanding deposit rates steady at 6.93 per cent and 7.16 per cent,' the rating agency said. This decline is driven by a reduction in high-yield assets like unsecured personal loans and microfinance institutions (MFIs), along with the Reserve Bank of India (RBI) repo rate cut to six per cent, leading banks to adjust their lending rates. Meanwhile, outstanding deposit rates remained flat for public sector banks (PSBs) and private banks (PVBs), at 7.16 per cent and 6.93 per cent, respectively. The one-year median marginal cost-based lending rate remained flat at 9.09 per cent, as state-owned and private banks remained unchanged at 9.08 per cent and 10 per cent, respectively, while foreign banks saw a 15 basis point rise to 7.93 per cent. Overall credit and deposit growth rates declined marginally during the fortnight ending April 18, 2025. Although credit offtake rose by 10.3 per cent year-on-year during this period, it was sharply lower than the previous year's growth of 15.3 per cent. The report attributed this slowdown to a higher base effect and the RBI's commentary on the high credit-to-deposit ratio. 'Muted growth across segments and typical behaviour at the beginning of the financial year,' said the rating agency. Meanwhile, deposits reached Rs 228.6 trillion as of April 18 and grew by 10.2 per cent year-on-year, lower than the 13.3 per cent growth (excluding merger impact) recorded last year. Amidst all this, banking liquidity turned surplus, driven by the RBI's liquidity infusion of around Rs 1 trillion via open market operations (OMOs), long-duration variable rate repo operations, and forex swaps, along with increased government spending. The surplus was further supported by muted credit demand, early-month foreign portfolio investor inflows, and relaxed regulatory measures. The recent repo rate cuts are expected to influence both lending and deposit rates. Rate cut transmission was faster in private banks due to their higher share of external benchmark linked rate (EBLR) loans, including those linked to the repo rate and Treasury Bills, compared to state-owned banks. Hence, this is likely to further increase pressure on interest margins.
Time of India
05-05-2025
- Business
- Time of India
Net interest margins of microfinance industry in FY25 anticipated to shrink: Report
The net interest margins (NIMs) of microfinance institutions (MFIs) are expected to shrink in the financial year 2025 ended in march, due to emerging challenges in asset quality and declining yields, according to a recent report by Mavenark Advisors. #Pahalgam Terrorist Attack Inside Operation Tupac: Pakistan's secret project to burn Kashmir Who is Asim Munir, the Zia-style general shaping Pakistan's faith-driven military revival 'Looking for partners, not preachers': India's strong message for EU amid LoC tensions The report mentioned that this comes after two years of improvement driven by the Reserve Bank of India's move to remove the cap on lending rates, better asset quality, and reduced leverage. However, the sector now appears to be entering a more challenging phase. It said "The microfinance industry has seen notable improvements in profitability over the past two years, due to the RBI 's removal of the lending rate cap, better asset quality, and reduced leverage. For the current fiscal year, Net Interest Margins are anticipated to shrink due to rising asset quality concerns and reduced yields among several MFI players". by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Play this game for 3 minutes, if you own a mouse Undo One of the key concerns is the rising number of delinquencies. According to the report, the increase in repayment delays, which began in the first half of FY25 , has continued into the second half of the fiscal year. This trend is now putting pressure on the financial performance of non-banking financial companies operating in the microfinance space (NBFC-MFIs). Due to this rise in delinquencies, the growth trajectory of NBFC-MFIs is likely to be impacted, with overall growth expected to slow to just 4 per cent in FY25. Live Events The report warned that the worsening asset quality could also drive up credit costs significantly, which are projected to rise to 6 per cent for the year. This rise in credit costs may further affect profitability, particularly Return on Total Assets ( RoTA ), which is expected to decline as a result. Operating expenses are also likely to see a moderate increase, partly due to the effect of a shrinking denominator caused by slower balance sheet expansion. Overall, the outlook for the microfinance sector in FY25 appears cautious, as players navigate a combination of asset quality stress, shrinking margins, and rising expenses. The report suggests that MFIs will need to focus on strengthening their credit assessment frameworks and improving collection efficiency to manage the emerging risks.
