Microfinance sector’s portfolio at risk 31-180 days rises sharply to 6.4%

microfinance

Portfolio at risk (PAR) 31-180 days, which essentially refers to the percentage of loan portfolio that is considered at risk of default, has deteriorated sharply to 6.4 percent in the third quarter of the current financial year, as compared to 2.0 percent in the year ago period, according to the Microfinance Industry Network’s Micrometer report.

The report added that NBFCs PAR 31-180 rose sharply to 3.7 percent as of December 31, 2024, as compared to 1.0 percent in the year ago period, NBFC-MFI PAR 31-180 increased to 6.7 percent as of December 31, 2024, compared to 1.6 percent in the year ago period.

Banks and small finance banks’ PAR 31-180 rose to 6.8 percent and 7.2 percent respectively as of December 31, 2024, compared to 2.3 percent and 2.8 percent in the year ago period, the report added.

The Assets Under Management (AUM) of MFIs were at Rs 1.43 lakh crore as on December 31, 2024, including owned portfolio of Rs 1.15 lakh crore and managed portfolio of Rs 27,662 crore. The owned portfolio of MFIN members is 76.5 percent of the NBFC-MFI universe portfolio of Rs 1.51 lakh crore, the report added.

AUM decreased by 0.1 percent compared to December 31, 2023 and decreased by 6.5 percent compared to September 30, 2024.

Loan amount of Rs 22,091 crore was disbursed in the third quarter of FY25 through 42.7 lakh accounts, including disbursement of Owned as well as Managed portfolio. This was 35.8 percent lower than the amount disbursed in the same period of FY24.

Earlier this month, the Karnataka state government promulgated The Karnataka Micro Loan And Small Loan (Prevention Of Coercive Actions) Ordinance, 2025, after harassment in collection of loans led to a few suicides.

The ordinance is aimed at tackling the menace of unregistered and unregulated lenders and lending outfits. It specifically exempts banks and NBFCs from its ambit.

The ordinance seeks to protect economically vulnerable groups, including farmers, women, and self-help groups, from excessive interest rates and coercive recovery methods employed by Microfinance Institutions (MFIs) and money lenders in Karnataka.

Moneycontrol had earlier reported that as a result of the ordinance, collection by lenders in Karnataka is likely to be affected as a second order impact with the state government rolling out new laws for small-ticket loans.