Crisis in Microfinance: Surge in NPAs Amid Borrower Over-Leverage

Loan portfolios of microlenders dropped by 2.3% with NPAs rising. A Crif High Mark report highlights borrower over-leverage affecting asset quality. There was a significant drop in disbursed loan amounts, with Kerala, Tamil Nadu, Odisha, and Rajasthan showing high stress levels. Major delinquency was noted in Tamil Nadu and Uttar Pradesh.

Microlenders are grappling with a 2.3% decrease in their loan portfolios this quarter, while non-performing assets have surged, according to a recent report.

Credit information company Crif High Mark has pointed out that microfinance institutions (MFIs), banks, and small finance banks are facing challenges due to borrower over-leveraging. Asset quality is deteriorating, with a notable rise in the number of borrowers holding over five active loans.

The first quarter of FY25 saw a sharp decline in loan disbursements, especially in Tamil Nadu and Uttar Pradesh, leading to heightened delinquency rates. Kerala, Tamil Nadu, Odisha, and Rajasthan also showed significant stress on asset quality, the report reveals.

(With inputs from agencies.)