The second wave of the COVID-19 pandemic has hit collection efficiencies in the microfinance sector, according to a statement by industry association Sa-Dhan. Collections have dropped 10-20 percent in April-May 2021 as lockdowns were imposed in various key states across the country.
The total disbursement by all lenders during FY21 was Rs two lakh crore whereas, down 21 percent from Rs 2.55 lakh crore during FY20. The decline was because of liquidity and pandemic related issues. After the lifting of the lockdown, disbursement has progressively increased from September 2020. In Q4, disbursement by all lenders was Rs 93,099 crore.
P Satish, executive director, Sa-Dhan, said that collection efficiency had reached 95-98 percent by March 2021, but the onslaught of the second wave hit the sector in the second week of April. “We expect the situation to improve in June 2021 with various initiatives of the RBI (Reserve Bank of India) and the Government,” he said. Though the microfinance sector, especially the small microfinance institutions (MFIs), faced challenges in accessing funds from banks, micro-lenders have shown resilience and their recovery rate has improved over the quarters, he added. The emergence of digital collection methods, such as cards, QR codes, and Bharat Bill Payment System have helped collections to improve gradually.
The microfinance sector recorded an increase of 17 percent year-on-year growth in portfolio. The combined micro credit portfolio of all lenders as on March 31, 2021 stood at Rs 2.47 lakh crore, of which banks accounted for a market share of 44 percent, followed by non-bank MFIs who had a 32 percent market share.
The average ticket size of loans in Q4FY21 for banks was Rs 43,434 and for non-banking financial companies (NBFCs), it was Rs 41,306. The average ticket size for small finance banks stood at Rs 36,993, for NBFC-MFIs at Rs 35,223, and for not-for-profits at Rs 32,031. The average ticket size for the industry was Rs 39,637.
During FY21, the number of unique borrowers nationally increased 5 percent to 5.99 crore from 5.7 crore in 2019-20, even as there was a 20 percent decline in the number of borrowers in Assam. As of March 2021, in terms of gross loan portfolio, the top five states were West Bengal, Tamil Nadu, Bihar, Karnataka and Uttar Pradesh.The industry and lender-specific portfolio at risk (PAR) had reached a peak in Q3FY21 due to the end of the moratorium, and they improved by the end of March 2021. As on 31 March 2021, the PAR 30+ reduced to 9.12 percent from 13.23 percent in Q3, PAR 60+ fell to 6.18 percent from 8.49 percent in Q3, the PAR 90+ decreased to 4.15 percent from 4.98 percent in Q3, while PAR 180+ increased to 6.70 percent from 4.75 percent in Q3. “It clearly shows that the economy is yet to be back at pre-COVID normalcy,” Sa-Dhan said.