Microfinance lenders have written off Rs 26,000 crore of sticky loans after Covid: Report
Microfinance lenders have written off around Rs 26,000 crore of sticky loans after Covid to clean their balance sheets and help the cumulative gross non-performing assets ratio to fall 90 basis points to 10.2% at the end of March. This is according to a quarterly report by credit bureau Crif High Mark, which analysed the data from top 30 microfinance lenders with a cumulative market share of 87.9%. The size of write-off constitutes 7.7% of the sectoral loan portfolio of Rs 3.38 lakh crore, Crif said.
The share of write-offs grew from 4.8% as of March last year. The Crif study validates an ET report of May 29, which said that the microfinance sector's non-performing assets dipped owing to a sizable chunk of bad loan write-offs. Lenders write off bad loans after making full provisions against them after a certain time period.
Some lenders do it after 270 days past due, while some do it after a year. This exercise helped the lenders clean their slate and create a stage for next stage growth. The technical write-offs are balance sheet management while repayment can still be possible from these accounts.
«With asset quality woes largely behind and new regulations offering a level playing field for NBFC-MFIs, coupled with higher household limits, the sector is already riding the new growth wave, albeit with an eye on building portfolio resiliency,» Emkay Global Financial Services said, expecting the microfinance loan growth to be around 21% per year till FY26 taking the overall portfolio to Rs 6.2 lakh crore. The Crif report placed the sector's year-on-year growth at 17.9%, largely contributed by the higher demand for loans from rural borrowers. The rural market witnessed 22.3% micro loan growth year-on-year, in comparison
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