 "MFI lenders turn cautious, loan portfolio declines as delinquencies rise")
As of June 2024, the microfinance portfolio stood at Rs 432,7000 crore, reflecting a quarter-on-quarter decline of 2.3 per cent over March 2024. Of late, microfinance institutions (MFIs) have been facing stress with a rise in delinquencies during this period: The de-growth in the loan portfolio is a reflection of the same.
Overleveraging by customers is also a pain point. The Reserve Bank of India’s ‘Report on Trend and Progress of Banking in India FY23’ had cautioned that the repayment capacity of borrowers needs to be considered while extending loans. And that MFIs need to ensure that the flexibility provided to them is used judiciously through transparent interest rate setting processes.
MFIs have played a crucial role in fostering financial inclusion but they should refrain from any reckless lending, said Financial Services Secretary M Nagaraju on Wednesday.
Two MFIs were among four non-banking finance companies that faced regulatory action last week, mainly for charging exorbitant rates to microloan borrowers from vulnerable sections.
2.3% decline in microfinance loan book, March to June 24 (Source: MicroLend's ‘Quarterly Publication On Microfinance Lending’)