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Assam minister promises loan waiver; lenders brace for hit on credit culture

Loan waivers have impacted the credit culture of borrowers in the past leading to high NPAs.

March 30, 2021 / 12:28 PM IST

An Assam state minister has promised to waive off loans given by Bandhan Bank and microfinance lenders in the state saying the government will return the money to lenders.

“Bandhan Bank & Micro Finance loans to people will be returned by Govt (Sic),” said Himanta Biswa Sarma, a minister in the Assam government in a Tweet on March 29.

Bandhan Bank, which has around 55-60 percent share in Assam’s microfinance market, didn’t offer any comments o this statement immediately. But the head of a microfinance industry body cautioned that a loan waiver can seriously impact the credit discipline in the state.

“If implemented, it will be a huge burden for those MFIs and banks that want to continue in the business in the state as loan waivers completely spoil the credit culture of borrowers,” said P Satish, Executive Director of Sa-Dhan, an MFI Industry body.  Sa-Dhan has 225 members of which 160 are MFIs.