“We are expecting recovery around the Durga Puja season. This is the time when business grows. But if the third wave comes, the recovery may be delayed by another quarter,” said Chandra Shekhar Ghosh, managing director at Bandhan Bank, the country’s largest microfinance lender. About 60% of Bandhan’s loan assets are unsecured micro loans.
The largest NBFC-MFI
in terms of loan outstanding said its collection efficiency improved to 91% (excluding arrears payment) in July compared with 81% in June. The same parameter for improved to 93% in July from 78% in June. It was 79% as against 70% for Suryoday Small Finance Bank.
Bandhan Bank’s collection efficiency in micro loans was 77% in June.
All microfinance lenders have collectively disbursed Rs 25,820 crore in the June quarter, which was 14% lower than in the March quarter, according to data collated by Sa-Dhan, the oldest microfinance industry association.
Lenders across the board have raised their respective loan provisions in the June quarter to cover the possible future credit risk and took a hit on their profitability.
“We expect business — both in terms of loan disbursement and repayment – to be back to March level (pre-second wave level) by September,” Satin Creditcare Network chairman HP Singh said.
The sector’s gross loan outstanding fell 14% to Rs 2,14,528 crore from Rs 2,49,333 crore three months back.
“We have seen a recovery in microfinance operations since July,” said P Satish, executive director at Sa-Dhan.
A third wave, if it comes, can create further disruptions.
“Just about when we were coming out of the impact of Covid-19, the second wave struck. Though we had higher disbursement during the first quarter of the current fiscal compared to the same period of previous fiscal, business of the sector faced major challenges with full and partial lockdowns. Small MFIs bore the major brunt as access to funds from banks was restrained,” Satish said.
