MFI stress to weigh on small finance banks’ loan growth, asset quality

livemint.com:

Subscribe to enjoy similar stories. Mumbai: Possible stress in the microfinance sector could weigh on small finance banks’ loan growth and asset quality in the short term as lenders adjust to the new market conditions over the next three-four months, according to Utkarsh Small Finance Bank MD and CEO Govind Singh. “In the short term, both the things do happen.

Because lenders will disburse less now and as rejection rates go up, banks will have to relook at their growth," Singh said adding that Utkarsh Small Finance Bank is also likely to see some impact on asset quality. “We have seen some stress in microfinance. The major challenge is over lending, and once that is taken care, in a matter of 3-4 months it should go back to the normal level," he said.

“We have seen some stress in the microfinance sector. The major challenge is in lending, and once that is taken care of, in a matter of 3-4 months it should go back to the normal level," he said. The recent guardrails put in place by MFI self regulatory organisation MFIN could also lead to some amount of disruptions, Singh said.

He was speaking on the sidelines of an event to announce the launch of a co-branded credit card on the RuPay network, WhatsApp banking services and onboarding of Mary Kom and Sunil Chhetri as brand ambassadors of the bank. Instead, the bank is looking to focus on its secured credit card product wherein it has tied-up with Walmart-backed super.money to offer loans ranging from ₹90 to ₹9 lakh, against a fixed deposit (FD) opened with the bank. “We are seeing a lot of potential in this segment, especially coupling with our core geography.