Alok Misra, CEO & Director, Micro Finance Business Community (MFIN) said that that total credit score high quality within the sector has been bettering. “If we take a look at the sector-level credit score knowledge, not particular person firms, it peaked by way of stress in October. Since then, we’ve seen a gradual enchancment each month, together with in November, December, January, and February,” he mentioned.
Loans being disbursed now are performing a lot better and displaying stronger portfolio high quality, he added.
Investec believes that the present cycle of Indian microfinance seems to be approaching its conclusion. Asset high quality indicators are displaying enchancment throughout numerous MFIs.
“I’ve at all times mentioned that these are usually not darkish clouds, these are non permanent blips which occurred as a result of host of circumstances, and never as a result of solely microfinance,” he mentioned.
“If I take one to 90 days, something under NPA in October it was 5.38%, in February it has come to 4.65% that’s almost 80 foundation factors discount, and inside that bracket, one to 30 days, 31 to 60 days, there are completely different measures, however total, in a single to 90 days, there was a gradual decline, and it’s a gradual decline.”
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Alok Misra mentioned the regulatory steps taken to deliver extra self-discipline into the microfinance sector. He defined {that a} key measure launched final 12 months restricted the variety of microfinance lenders a borrower may method. Initially set at 4 lenders in July and August 2023, this restrict was additional tightened to 3 from April 1, 2025, after a four-month discover interval.
This transfer, in response to discipline suggestions, has helped instill better credit score self-discipline and has barely tightened the stream of cash, contributing to raised mortgage high quality—although it is nonetheless early to straight hyperlink these guidelines to improved credit score efficiency.
He additionally addressed issues about borrower overleveraging. Misra identified that solely a small portion of debtors—about 3.2%—have taken loans from greater than 4 microfinance lenders, so the influence of this restrict will not be more likely to be very massive. Nevertheless, he said that debtors at this time are more and more taking loans from each microfinance establishments and retail lenders, which is making it more durable to keep up monetary self-discipline.
To take care of this, MFIN has launched a ₹2 lakh cap on whole borrowings per borrower, which incorporates not simply microfinance loans but additionally unsecured loans from retail lenders. Whereas this will cut back the enterprise scope for microfinance companies, the main target stays on sustaining accountable lending and avoiding extreme borrower debt.
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