CHENNAI: Tamil Nadu topped in borrowings from microfinance institutions in the country between September 2020 and September 2021, pointing to resurgence in business activity and a possible lack of access to relatively cheaper bank loans.
The 11th edition of “Microfinance Pulse”, a quarterly publication by Small Industries Development Bank of India (SIDBI) and EquifaxIndia, revealed that TN’s borrowing or outstanding loan portfolio of Rs 29,000 crore for the period was 13 per cent of the total borrowings under microfinance sector in India.
Though borrowing from microfinance institutions for a shorter period is handy, especially when you have an order, the rate of interest is quite high. Interest rate on loans offered by NBFCs is at least 3 per cent to 5 per cent more compared to bank rates. “But such short-term borrowings from NBFCs are cheaper when compared to usury or ‘kandu vatti,” says K. Mariappan, president, Tamil Nadu Small and Tiny Industries Association.
During the pandemic micro small and medium enterprises in Tamil Nadu were struggling to get funds to stay alive. Some of them were worried over being declared non-performing assets (NPAs) by banks if they fail to service their loans on time.
“Since banks refuse to extend the tenure of loans, these micro industries rely on microfinance institutions. They take loan from non-banking financial institutions or microfinance institutions at a higher interest than banks to meet their payment obligations with banks,” says industrial estate manufacturers’ association president K V Kanakabaram.
Delay in repaying loans during the pandemic crossed 90 days across the country, including Tamil Nadu, the report said. The report said that microfinance industry witnessed a slowdown due to the nationwide lockdown from March 2020. The quantum of loan disbursed also contracted between October 2019 and September 2020 by 28 per cent in volume and 24 per cent in value, the report said. The microfinance industry, however, is back to expansion mode and it grew by 35 per cent and 37 per cent by volume and value, respectively, between October 2020 and September 2021, the report said.
Factfile
1. Tamil Nadu is leading with portfolio outstanding Rs 29,335 crore and contributes 13% towards the total portfolio outstanding of microfinance institutions
2. As on 30 September, 2021, Tamil Nadu, West Bengal, Bihar, Karnataka and Uttar Pradesh are top five States with huge borrowings
3. Book size of MFI Industry as on September 30, 2021 is Rs 2,26,123 crore
4. Highest number of loans are issued under 30K-40K ticket size category across all the quarters