Monitoring of contributions for up to 29 days in micro-loans to contain slippages: Sidbi

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Lenders should closely monitor microloans with delays of up to 29 days to avoid further deterioration in asset quality amid easing tensions.

The Covid-19 pandemic, which erupted in March 2020, has severely affected the microfinance industry due to the disruptions it has caused in the supply chain and business operations, especially for the low-income group .

As the industry’s collection efficiency improves, active loan default tranches improve in March 2021 compared to December 2020, according to Sidbi.

Delinquency levels over 90 days, which rose sharply to 4.96% in December 2020, also moderated to 4.12% in March 2021, showing signs of easing tensions in the sector, a said Sidbi Chairman and CEO Sivasubramanian Ramann.

‘Microfinance Plus’, a quarterly report from Sidbi and Equifax showed that defaults over 90 days for the industry climbed to 4.12% as of March 31, 2021 from 0.86% as of March 31, 2020.

With the exception of Karnataka, delinquency over 90 days in all the top 10 states increased in March 2021 compared to March 2020.

The microfinance industry portfolio grew 18% year-on-year in FY21 to reach Rs.249,277 crore. Of the industry-wide gross loan portfolio, 80 percent was provided by the top 10 states and West Bengal has the highest outstanding portfolio.

Karnataka’s portfolio outstanding stood at Rs 20,330 crore, up 16% from March 2020 to March 2021.

Analysis of the market share by zone in terms of amount of disbursements shows that the East zone contributed 45% of the total amount of disbursements in January-February-March 2021, the highest of any zone, according to the report. Sidbi.

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