Demonetisation hits small loans as sectoral growth more than halves
ICRA said, "The Indian micro loan sector with a size of around Rs 1.7 lakh crore as on March 31, 2017, has grown at a healthy compounded annual growth rate of 32% during FY2013-2016. Of this NBFC-MFIs, Small Finance Banks (SFBs) and Banks (excluding the SHG Bank linkage programme) had grown at a much faster pace of 57%. However, the growth trajectory for NBFC-MFIs/SFBs and banks changed post-demonetisation with the portfolio growth slowing down from 72% in FY2016 to 29% in FY2017."
India's micro loans sector grew at 29% in FY2017 as against 72% in the year previous to last, ICRA said on Monday. Fresh disbursements slowed down substantially in H2FY2017, consequently, leading to their overall portfolio growth shrinking considerably, it said.
MFIs and SFBs raised an aggregate of Rs. 4,713 crore of equity capital in FY2017, of which Rs 1,155 crore was raised after demonetisation, indicating continued support from equity investors.
ICRA said, "The Indian micro loan sector with a size of around Rs 1.7 lakh crore as on March 31, 2017, has grown at a healthy compounded annual growth rate of 32% during FY2013-2016. Of this NBFC-MFIs, Small Finance Banks (SFBs) and Banks (excluding the SHG Bank linkage programme) had grown at a much faster pace of 57%. However, the growth trajectory for NBFC-MFIs/SFBs and banks changed post-demonetisation with the portfolio growth slowing down from 72% in FY2016 to 29% in FY2017."
Rohit Inamdar, Group Head Financial Sector Ratings, ICRA said, “Overall collection efficiencies for the industry as a whole came down from around 99% before demonetisation to 82% in December 2016, and improved to around 85-88% till March 2017."
"Consequently, the 0 days past due delinquencies that had peaked to 23.6% in February 2017 improved to 19% in June 2017. However, further flows from softer buckets led to deterioration in 90 days past due delinquencies from 4.9% as on February 28, 2017 to 11% as on June 30, 2017," he said.
“Based on the present recovery trends from delinquent buckets, 70-75% of the portfolio delinquent more than 90 days is likely to be written off, therefore mean credit costs for the industry as a whole are likely to be in the range of 5.5-8% for FY2018," Inamdar said.
"Given their higher expected credit costs for FY2018, ICRA estimates that MFIs and SFBs together would need external capital of Rs 9,000-11,000 crore for growing at a CAGR of 25-30% over the next three years, while maintaining a leverage at around 5 times. Therefore, present leveraging levels, expected credit losses and ability to raise capital will be a critical distinguishing factors for MFIs in the near to medium term,” he said.
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.
RECOMMENDED STORIES
Retirement Planning: SIP+SWP combination; Rs 15,000 monthly SIP for 25 years and then Rs 1,52,000 monthly income for 30 years
Top Gold ETF vs Top Large Cap Mutual Fund 10-year Return Calculator: Which has given higher return on Rs 11 lakh investment; see calculations
Retirement Calculator: 40 years of age, Rs 50,000 monthly expenses; what should be retirement corpus and monthly investment
SBI 444-day FD vs Union Bank of India 333-day FD: Know maturity amount on Rs 4 lakh and Rs 8 lakh investments for general and senior citizens
EPF vs SIP vs PPF Calculator: Rs 12,000 monthly investment for 30 years; which can create highest retirement corpus
Home loan EMI vs Mutual Fund SIP Calculator: Rs 70 lakh home loan EMI for 20 years or SIP equal to EMI for 10 years; which can be easier route to buy home; know maths
03:44 PM IST