Asset quality of microfinance institutions, small finance banks has improved: CRISIL

Asset quality of MFIs in Tamil Nadu, Kerala, Odisha, West Bengal and Bihar remained largely resilient despite demonetisation and its aftermath.

Asset quality of microfinance institutions, small finance banks has improved: CRISIL

New Delhi: Asset quality of microfinance institutions (MFI), including small finance banks, has come out of the impact of demonetisation and stabilised since June 2017, a CRISIL report said here on Thursday.

"Portfolio delinquencies, for a representative set of MFIs, measured in terms of 30 and 60 days past due (dpd), have improved to 5.6 percent and 5.3 percent, respectively, as on December 2017, compared with 7.6 percent and 6.8 percent, respectively, as on June 2017," the report said.

Asset quality has improved, as evidenced by reducing portfolio delinquencies, the rating firm said in its report, adding that "cumulative collection efficiencies have risen to over 99 percent for disbursements since April 2017".

High degree of investor support was reflected in the significant equity and debt raised after demonetisation, the report noted.

"The reduction in delinquencies shows that borrowers are paying more than one instalment and there is the recovery in the higher-delinquency buckets," said Krishnan Sitaraman, Senior Director, CRISIL Ratings.

However, the weakening in asset quality was not pervasive post demonetisation, as per the rating firm. 

Asset quality of MFIs in Tamil Nadu, Kerala, Odisha, West Bengal and Bihar remained largely resilient despite demonetisation and its aftermath, and these states continue to exhibit strong collection performance with 30 dpd staying below 2 percent, it said.

Improvement in asset quality performance in Uttar Pradesh, Maharashtra and Karnataka has been significant, which were affected the most due to demonetisation, according to the report.

In Uttar Pradesh, 30 dpd reduced to an estimated 14 percent as on December 2017 from 23 percent in June 2017, it showed. 

Strong investor appetite for both equity and debt capital market issuances has helped MFIs tide over the challenges, it said. 

"Since demonetisation, CRISIL estimates MFIs have raised around Rs 4,000 crore of equity and Rs 7,000 crore of debt. Additionally, banks and refinance institutions also continue to extend funding to MFIs."

 

(With IANS inputs)

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