NEW DELHI: It is election season. But unlike Assam, the Trinamool Congress party in West Bengal has not promised loan waivers a choice that has brought some relief to not just microlenders, but also commercial banks amid concerns of worsening asset quality, analysts at brokerage firm Jefferies say.
“TMC’s election manifesto was released recently... and interestingly, it does not explicitly propose any waiver for micro-borrowers, which should be a relief for microfinance institutions (MFIs) and Bandhan Bank,” Jefferies said.West Bengal accounts for 47 per cent of Bandhan Bank’s microfinance portfolio, while 16 per cent originate from Assam.
Waivers, the Jefferies note said, bode ill for a state’s credit culture and Bandhan Bank is among those banks which have felt the heat. In the quarter ended December, the Kolkata-based lender’s pro forma gross non-performing assets (GNPAs) rose to 7.12 per cent, a solid chunk of which has come from delayed microloan payments.
While the bank management has guided for a recovery in 2-3 months, others aren’t quite sure. Much will depend on how the recently passed Assam Microfinance Bill is implemented. After Assam passed the bill in December following a series of reports of coercive lending, accompanied by the promise of a loan waiver, Bandhan Bank has witnessed a 10-percentage point contraction in collection efficiency between the December quarter and January 1-16.
Collection has dipped in West Bengal too, but by a meagre 1 percentage point. According to a Emkay report released January, Assam has seen sharp growth in disbursements over the past few years, albeit on a small base. Even a partial waiver of loans will directly impact lenders such as Bandhan Bank, the analysts said.