Back to pre-demonetisation level of 1% of all loans disbursed after February 2016
Tamil Nadu’s non-performing asset (NPA) situation in the microfinance sector has returned to the pre-demonetisation level of 1% of all loans disbursed after February 2016, as of June 30, 2018, according to data from Microfinance Institutions Network (MFIN).
The State has around 45 formal institutional lenders and 13 members of MFIN, which lend to the microfinance segment. Tamil Nadu has a gross loan portfolio of ₹19,500 crore. MFIN members account for ₹4,917 crore.
The State fared better than the national average in terms of the portfolio at risk (PAR), a metric which represents the proportion of a microfinance institution’s total gross outstanding loan portfolio which is at risk of default.
When it came to PAR for over 30 days, Tamil Nadu accounted for just 1% of loans disbursed after February 2016, as of June 30, 2018, according to the data. At the national level, the metric stood at 3.2%.
Data from credit bureau CRIF High Mark Credit Information Services also confirms the trend. According to the firm, PAR for over 30 days is now 0.98% for Tamil Nadu, down from 2.15% in September 2017.
The microfinance PAR for over 30 days stood at 0.37% for Tamil Nadu in September 2016, and jumped to 14% as on March 2017, following the move to demonetise high-value currency notes.
“Demonetisation hit repayment in the microfinance sector across the country. Lenders turned cautious because of rising [number of] defaults. However, now, Tamil Nadu has recovered faster than the other States, and the microfinance sector will be back on the growth track,” said Harsh Shrivastava, CEO, MFIN.
“The microfinance sector in the State has stood the test of demonetisation and other uncertainties well,” said an industry official who did not wish to be named. He also expected disbursements to go up from here on, as the NPA situation had improved.
Mr. Shrivastava pointed out that as more players enter the sector, improved investor confidence thanks to proper regulations and better transparency would support the growth story going forward.
He also noted that the average ticket size of microfinance loans was rising.
According to data from CRIF High Mark Credit Information Services, the average ticket size in Tamil Nadu was ₹26,000 in the first quarter of 2018-19 — up 11% year-on-year. Tamil Nadu continued to be the largest market for microfinance lending, accounting for 15%, it added.