Microfinance Sector NPAs Surge to ₹50,000 Crore by December

Quick Summary

• Non-performing assets (NPAs) in India’s microfinance sector reached ₹50,000 crore at the end of December.
• This represents 13% of gross loans, with portfolios at risk rising from 1% too 3.2% over a year.
• IndusInd Bank notes emerging stability but expects elevated slippages for another quarter.
• The portfolio unpaid after 90 days was classified as NPA, showing a considerable rise in long-term default rates.
• Inclusion of non-reported data could increase NPAs to ₹56,000 crore or 14%.
• High growth-driven over-lending pressures increase stress among lenders like Bandhan and IDFC First banks.
• Regulatory changes aim to reduce capital requirements for micro loans meant for business generation.

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Indian Opinion Analysis

The reported surge in NPAs within the microfinance sector highlights meaningful vulnerabilities related to over-lending and credit discipline deterioration. While regulatory interventions have lowered capital requirements on certain unsecured loans, it remains crucial that lending institutions strategically address these stresses without merely expanding loan portfolios further. Ensuring financial inclusion must be balanced with enduring credit practices to prevent a deeper crisis.

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