Mumbai: The gross loan portfolio of micro loans at the end of the June quarter stood at Rs1.06 trillion, according to a Microfinance Institutions Network (MFIN) report released on Tuesday.
Of this, banks, micro finance institutions (MFIs) and small finance banks hold 36%, 31% and 27% share, respectively.
MFIN, a self-regulatory body that keeps track of close to 65 institutions registered with it, said the gross loan portfolio for MFIs increased by 8% year-on-year to Rs35,045 crore in the June quarter.
The slow growth can be attributed to the fact that most MFIs have converted into small finance banks and are therefore not counted in the bucket of MFIs.
MFIs’ portfolio at risk (PAR) for 30 days at the end of the June quarter was 7.46% compared to 10.80% in the previous quarter. Data from Bharat Financial Inclusion Ltd and Share Microfin Ltd. are not included in this.
Uttar Pradesh continues to hold the highest PAR 30 days at 23.67%, followed by Punjab and Maharashtra at 18.79% and 15.54%, respectively. Post demonetisation, some local political leaders in UP, Kerala, Madhya Pradesh and Maharashtra tried to influence borrowers by claiming their loans have been forgiven. This led to a deterioration in the asset quality across these states.
With the intervention of self-regulatory organisations and loan providers, borrowers were informed about the importance of credit score in future borrowings. India is among one of the countries in the world where PAR 30 before demonetisation was below 1%.
“Given the nature of the loan, one should consider 1% as average credit cost through cycles. We believe industry will benefit from e-know your customer (KYC), Aadhaar, cashless disbursement and further integration of technology," said Vishal Rampuria, an analyst at HDFC Securities.
In terms of regional distribution of portfolio, south, west, north and east account for 31%, 22%, 26% and 21%, respectively.