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Time of India
26-05-2025
- Business
- Time of India
Microfinance portfolio shrinks 14% as asset quality challenges persist: Report
The microfinance sector's loan portfolio contracted by 14 percent year-on-year to Rs 3.81 lakh crore at the end of the March quarter, with asset quality remaining a significant challenge, according to a report by credit information company Crif High Mark. While loans unpaid for up to 30 days showed some quarter-on-quarter improvement—falling to 1.4 percent in March from 1.8 percent in December—delinquencies in other categories continue to rise, signalling ongoing difficulties in recovery, PTI reported. The past year has been tough for the microfinance industry, which primarily serves borrowers at the bottom of the pyramid with smaller, livelihood-focused loans. Over-leverage and multiple lending relationships among borrowers have been identified as key factors behind deteriorating asset quality. To combat this, the industry has implemented several measures, including capping a borrower's lender relationships to four since 2024, aiming to stabilize credit health. Regionally, portfolio contractions were most pronounced in Tamil Nadu and Karnataka, where the threat of ordinances caused lenders to reduce exposure, leading to a 7 percent decline quarter-on-quarter in gross lending. Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like [Click Here] 2025 Best Luxury Hotel Prices Expertinspector Learn More Undo In contrast, West Bengal recorded a 1.5 percent increase. The number of active loans also fell to 14 crore at the end of March from 14.6 crore in December and 16.1 crore a year earlier. New disbursements between January and March stood at 1.33 crore, down sharply from 2.40 crore in the same period last year, though slightly higher than the 1.2 crore disbursed in the previous quarter. The report notes that the industry is now favouring higher-value loans, with the portfolio for loans above Rs 1 lakh growing 38.5 percent year-on-year, while loans below Rs 30,000 dropped by 36 percent. Despite current challenges, Crif High Mark sees the sector moving toward long-term sustainability. "While current indicators suggest cautious lending and persistent stress in parts of the portfolio, improvement in early-stage performance and a gradual move towards higher-quality credit segments are encouraging trends," the report said. "Lenders are making conscious choices that favour resilience, stability and long-term impact... as institutions recalibrate and regulatory frameworks evolve, we are confident that the sector is laying the groundwork for stronger and more inclusive growth," said Ramkumar Gunasekaran, director and head of sales at Crif High Mark. 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
26-05-2025
- Business
- Time of India
MFI portfolio continues to de-grow, asset quality remains challenging: Report
Microloans portfolio for all lenders de-grew by 14 per cent year-on-year to Rs 3.81 lakh crore at the end of the March quarter, a report said on Monday. Asset quality continued to remain challenging, even though loans unpaid for up to 30 days showed some improvement quarter-on-quarter, the report by Crif High Mark, a credit information company, said. It can be noted that the last year has been a difficult one for the microfinance industry, serving people at the bottom of the pyramid with smaller and livelihood-centric loans. Asset quality has worsened, and over-leverage and multiple lending relationships of borrowers have been called out as the key reasons for it. The industry has taken a slew of actions, including limiting a single borrower's lender relationships to four, to arrest the slide in asset quality since 2024. The threat of ordinances led lenders to contract faster in Tamil Nadu and Karnataka, which showed a 7 per cent decline in gross lending portfolio quarter-on-quarter, while West Bengal showed a 1.5 per cent increase. The number of active loans declined 14 crore at the end of March, down from 14.6 crore in December and 16.1 crore in the year-ago period, the Crif report said. Live Events The industry disbursed 1.33 crore loans in the three-month period between January and March, which is down from 2.40 crore in the year-ago period. When compared to the quarter-ago period, the number of loans was higher at 1.2 crore in the October-December period. On the asset quality front, the CIC report said early delinquency of loans unpaid for up to 30 days improved to 1.4 per cent in March against 1.8 per cent in December, but added that the same continues to rise in other buckets, signalling "ongoing challenges". Having adopted certain guard rails, the industry seems to prefer to lend higher amounts, the report said, pointing out that portfolio for loans above Rs 1 lakh grew by 38.5 per cent year-on-year, while those below Rs 30,000 were down by 36 per cent. The CIC said the MFI sector is on the path to long-term sustainability. While current indicators suggest cautious lending and persistent stress in parts of the portfolio, improvement in early-stage performance and a gradual move towards higher-quality credit segments are encouraging trends, it said. "Lenders are making conscious choices that favour resilience, stability and long-term institutions recalibrate and regulatory frameworks evolve, we are confident that the sector is laying the groundwork for stronger and more inclusive growth," its director and head of sales Ramkumar Gunasekaran said. Economic Times WhatsApp channel )
