Banking stress: Demonetisation woes drag on for small finance banks

Microfinance portfolio of SFBs saw a muted growth of about 3% last year

Created with a vision of deepening financial inclusion, most small finance banks (SFBs) closed last financial year with a loss or marginal profit due to high provisions on account of non-performing assets (NPAs). This was due to the effects of demonetisation and loan waivers.

For a major part of the last financial year, the microfinance industry saw its NPAs increase to more than 5-6 per cent, against about one per cent prior to demonetisation. Almost all SFBs, baring, AU and Capital Small Finance Bank, which are urban-focused banks, have more than 80 per cent of their loan portfolio concentrated in