Anti-CAA protests in Assam: MFIN asks RBI forbearance for extended payments

The representative body of microfinance institutions, Microfinance Institutions Network (MFIN) has has sought forbearance for extended payments from Reserve Bank of India. MFIN's move comes on the back of anti-Citizenship Amendment Act (CAA) protests taking place in the entire north-east region, pockets of Uttar Pradesh, as well as parts of West Bengal.

“We have asked RBI for forbearance as the payments have been impacted in few districts in Assam. In some cases, by January, the defaults will run into 90 days,” said a senior official at MFIN. However, the delays have not yet translated into defaults and MFIs are hopeful of recovery once the situation eases. Microfinance institutions had reported higher NPAs in Q2 of the current financial year due to defaults in Assam.

The total microfinance portfolio in Assam in close to Rs 12,000 crore. About 40 per cent of the portfolio, or Rs 4,800 crore is concentrated in upper Assam, the area where anti-microfinance protests have been taking place. According MFIN data, the gross loan portfolio of NBFCs and MFIs in Assam is about Rs 2,500 crore.

“In some pockets there are delays in repayments, but due to this delay, the PAR 30 (portfolio at risk beyond 30 days) will not be impacted” said Kuldip Maity, MD and CEO at Village Financial Services.

According to the latest report from CRIF High Mark, the credit bureau for the microfinance segment, Q2 of FY2019-20 witnessed overall higher delinquency levels than in the quarter which ended on June 2019. PAR 1-30 (portfolio at risk open for loans overdue between one and 30 days) was contained at one per cent during the quarter ended Q1 after rising to 2.9 per cent in the quarter ended September 2018. However, once again it breached the one-per cent mark, and was reported at 1.3 per cent at the end of Q2 this financial year.

The PAR 180+ (portfolio at risk open for loans overdue for 180 days) stands high at 4.5 per cent. This is 0.2 per cent higher than the previous quarter, though 1 per cent lower than the same period last year.

Factors like natural calamities and over-indebtedness have added to the delays.

In Assam, protests against microfinance organisations are being led by one Jagrata Mahila Suraksha Samaj, which claims microfinance lending is responsible for suicides in the state.  

Now, dominant players in the MFI segment are the banks. In September 2019, the share of GLP for banks rose to 40.8 per cent, while that of NBFC MFIs was down to about 30 per cent. Banks have reported a high Y-o-Y growth of 68 per cent, as of September 2019.

They dominate urban and rural geographies both, in volume and value as of Q2 of FY 2019-20. Hence, apart from MFIs, banks are expected to see higher NPAs due to the disruptions.

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