Assam, which has been experiencing stress in collection efficiency in microfinance loan portfolio since September 2019, is likely to come back to “normalcy” by the end of this financial year.
According to Manoj Nambiar, Chairman, Microfinance Institutions Network (MFIN), the relief measures announced by the Assam Chief Minister, Himanta Biswa Sarma, has focused on responsible borrowing, repayment and lending.
The Assam government had, on Friday, announced a special one-time relief to MFI borrowers in the State under three broad categories. It has announced a sum of ₹25,000 for each regular client as an incentive to them to continue maintaining good credit discipline. For those borrowers who are overdue or have turned into NPA (non-performing asset), the State government will pay the amount which is overdue to make them regular with institutions and their credit bureau records. For those categories of customers who are stressed and impacted by the Covid pandemic leading to a loss of livelihood, the State government would pay the lenders to clear the outstanding loan.
Optimistic outlook
“The relief measure announced by the State government will go to the Cabinet and then we expect implementation of measures by early August. We have already started getting calls from borrowers post the press conference by the Chief Minister. We still have three quarters to go and we are hopeful that when we close the financial year 2021-22 ,we will see a different Assam as compared to what it was in FY-21,” Nambiar told media at a virtual press conference on Monday.
Assam had a delinquency rate as low as 0.32 per cent till September 2019 and has been one of the best States on portfolio quality. However, since October 2019, local reaction to multiple lending and non-payment, followed by the Covid-19 lockdown and the moratorium led to uncertainty in the State over expectations on loan waivers.
According to Alok Misra, CEO and Director, MFIN, the measures announced by the government would help provide relief to borrowers in stressed times. “Not only have measures been taken to incentivise the regular clients, but the government has thoughtfully addressed the overdue/NPA clients as well, with the objective of making them regular. The governments focus on maintaining credit discipline is evident through incentivising microfinance clients to maintain good repayment records,” he said.
The microfinance industry in Assam serves over 26 lakh low income women clients with a loan outstanding of around ₹12,500 crore from RBI regulated entities including universal banks, SFBs, NBFC-MFIs and NBFCs. However, the relief announced on Friday has been for a maximum outlay of ₹8,250 crore which has been arrived after applying filters of a maximum of three lenders to a borrower, ₹1.25 lakh exposure of an individual client of JLG methodology and interest rates to the total state loan outstanding of 12,535 as on March 31, 2021.
So around ₹4,000 crore would not strictly fall under the category of microfinance loans and hence would not qualify for relief.