Urban small borrowers default more than their rural peers

Urban micro-borrowers have a higher tendency to not pay back their loans on time than their rural counterparts, a report by a credit information company has said. Urban borrowers' payment overdue for up to 30 days stands at 3.25 percent as of the March quarter, as against 2.5 percent for the rural ones, CRIF High Mark said in a report released Thursday.

However, from payments overdue of 31-180 days bracket, the urban and rural borrowers are at an equal footing, with the stress levels at 1 percent for lenders since September 2018, it said. The rural portfolio was 54 percent of the total gross loan portfolio of Rs 1.88 lakh crore, it said, adding the rural component grew at 50 percent, which is 11 percentage points faster than the urban ones.

The gross loan portfolio grew 12 percent in the March quarter as compared to the preceding one. There are 5.6 crore active microfinance borrowers as of March 2019, which is 22 percent growth over the previous fiscal. National average ticket size has increased 12.7 percent in FY19, while national average exposure has increased by 22 percent during the same period, it said, adding this can be largely attributed to big-ticket lending.

The Eastern region, including Assam, is accounting for half of the high-ticket loans, while the Western states account for a fourth of the high ticket loans, it said. Over 6.50 percent of the borrowers in Tamil Nadu have four or more loans from different lenders, it said, adding the same was a low 1.46 percent in the year-ago period.

It can noted that the microfinance industry went into big trouble in the undivided Andhra Pradesh in the early part of this decade mainly because of the over-leveraging that borrowers had run themselves into wherein a customer borrowed from multiple small lenders, which finally crippled the entire industry in the state, which otherwise was the model market for the sector for many years. From a market share perspective, banks have gained and now account for 36.89 percent of the disbursements for FY19 as against 34.69 percent in the previous fiscal.

The market share has been snatched from dedicated NBFC-MFIs and small finance banks, it said.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)