NEW DELHI: The crisis-ridden microfinance industry has started to see collections falling again overshadowed by the raging second wave of the coronavirus pandemic. Though some states have classified the microfinance industry as an essential activity, the cash flows of borrowers have been affected due to the lockdown-like restrictions, thereby affecting their repayment ability.
According to Sachin Sachdeva, Vice President and Sector Head, Financial Sector Ratings, ICRA, the industry may witness a sequential drop of 8-10 per cent in collections in April 2021. “Several states/Union Territories (UTs) have either imposed lockdowns or have placed significant restrictions on people movement and gatherings to curb the spread of pandemic.
This is creating disruptions in the economic activities and impacting the field operations of microfinance institutions (MFIs) Good on-balance sheet liquidity and sizeable provisions created in FY21 provide cushion for absorbing further shocks. Nevertheless, the severity of the impact would depend on the time taken for the pandemic to subside. Collection may dip further if the infections continue rising and more restrictions are imposed across locations,” he said in a note.
On Monday, RBI Governor Shaktianta Das met the representatives of NBFC-MFIs and the two industry associations—a-Dhan and MFIN (microfinance institutions network). Das asked these lenders to assess the ground level situation and stressed that these lenders need to follow appropriate risk management.