MFI loan defaults rise in Assam

Chennai: Protests against micro lenders in some districts of Assam have started affecting the asset quality of the entire state as the delinquencies have risen significantly.

In the last quarter, several micro finance borrowers in five-six districts of Assam had stopped repayment of their loans. The collection efficiency that stood at 98 -99 per cent had dropped to 70 per cent. As the exposure per borrower went up, customers in some of the districts started defaulting and demanding waiver. They alleged that the micro-lenders were charging higher interest rates and were following tough recovery methods.

The districts of Sonitpur, Golaghat, Jarhat, Siva-sagar, Dibrugarh and Tinsukia have been highly affected by the protests.  These account for at least 15 to 20 per cent of the 27 lakh customer base of the state. These districts also account for 10 per cent of the state’s total loan portfolio outstanding of Rs 12,500 crore, finds Micro Finance Institutions Network (MFIN)

According to rater Icra, the protests have affected the overall delinquency levels of the state. At an aggregate level, it was found that softer bucket delinquencies have risen substantially over the previous quarter.

The collection efficiency in the state had remained high, with 30+days past due (dpd) remaining below 1 per cent till September 30, 2019. This has gone up to 3.3 per cent as on December 2019. The share of overdue portfolio (0+ dpd) rose sharply from 1.50 per cent in September to 10 per cent in December.

“The recent protests in Assam have negatively impacted MFI operations and the softer bucket delinquencies (0+ and 30+ dpd) have shot up in December 2019,” said Abhishek Dafria, vice president and head—structured finance ratings at Icra.

The rapid growth of the loan book of late has also  aggravated the concerns over asset quality.