New Delhi, Dec 29 (FN Agency) Microfinance Institutions of MFIs saw their collections bouncing back in Q2 of the current fiscal to March 21 level with gradual opening of the economy but their asset quality remains monitorable, rating firm ICRA has said a report. Despite the recovery in the collection efficiency (CE), overdues increased significantly with the 90-plus days past due at 6.2% as on September 30, 2021 compared to 5.3% as on March 31, 2021. “The delinquencies had risen significantly in May-June 2021, however, with incremental restructuring and some recovery in CE the reported delinquencies declined by September 30, 2021, though the same remain elevated as compared to March 2021 level,” ICRA said. With economic activities on the rise it is expected that MFIs would see growth in disbursements in the second half of the current fiscal. Sachin Sachdeva, Vice President and Sector Head, Financial Sector Ratings, ICRA said that disruptions caused by the second wave impacted the AUM (asset under management) growth of the industry in H1 FY2022 as the movement of people was greatly hindered and the entities focused on collections instead of disbursements.
“The pandemic-induced disruptions moderated the portfolio growth to around 5% (annualised) in H1 FY2022 as compared to growth of 9% in FY2021. Nevertheless, aforementioned favourable factors provide hope for better growth prospects in FY2022 with an estimated growth rate of 12-15%,” he said. From liquidity perspective, the MFIs have been supported by the various measures undertaken by the Reserve Bank of India (RBI) and the Government of India including liquidity enhancement measures and introduction of guarantee schemes for the stressed non-banking financial companies (NBFCs) including MFIs. “Notwithstanding the expected improvement in business during H2 FY2022 the persisting asset quality pressures would keep the credit costs elevated and consequently the profitability subdued in FY2022. Nevertheless, the growth in the AUM in FY2022 is expected to be better compared to FY2021. Further, the ability of MFIs to recover from overdue/restructured accounts would remain monitorable,” said Sachdeva.