MFI asset quality deteriorates sharply in Bihar, UP and Kerala: CRIF report

Microfinance institutions' asset quality in three states such as Bihar, Uttar Pradesh and Kerala has deteriorated sharply as on September 2024, according to the CRIF report.

The portfolio at risk (PAR) for the Kerala in 31-180 days has gone up to 7.2 percent as on September 2024, from 2.1 percent as on September, 2023.

Similarly, PAR for Bihar and Uttar Pradesh has gone up to 5.5 percent and 4 percent as on September 2024, from 1.9 percent and 0.9 percent as on September 2023, respectively, the report showed.

"Q2FY25 witnessed further increase in delinquencies across all DPD bands. Delinquencies spiked across all ticket sizes and lender types, particularly in the top 10 states," the report said.

The report further added that PAR 31-180 days past due (DPD) was higher for SFBs compared to other major lenders. NBFCs had lowest PAR 31-180 as of September 2024. Among top states, Bihar, Tamil Nadu, Uttar Pradesh and Odisha account for 62% impact on incremental Y-o-Y & Q-o-Q delinquency.

The MFI sector has been in the news with rising concern over lenders charging high interest rates in some pockets. The regulator recently highlighted this. The self-regulatory organisations for the sector have brought in norms like a cut in lending rates, and an extra layer of underwriting.

PAR in MFI and retail loans has been highest for Uttar Pradesh, Odisha and Kerala.

Source: MONEYCONTROL, 08th January, Mumbai