The share of loans written off by microfinance lenders in their loan books has been increasing year-on-year. According to the latest quarterly report from credit bureau Crif High Mark, the write-offs have risen to 8.6 percent (Rs 38,072 crore) of Rs 4.42 lakh crore in gross loan portfolio (GLP) as of March 2024. This is up from 7.7 percent (Rs 26,880 crore) of Rs 3.49 lakh crore in GLP as of March 2023.
Earlier reports from Crif High Mark show that as of March 2022, microfinance loans written off accounted for 4.8 percent (Rs 13,752 crore) of Rs 2.86 lakh crore GLP, and as of March 2021, it was 3.1 percent (Rs 8,060 crore) of Rs 2.60 lakh crore.
Writing off bad loans is a common practice by lenders to maintain cleaner balance sheets and improve tax efficiency. However, it’s important to note that borrowers of these loans are still responsible for repayment unlike in the case of waived-off loans.
Delinquency in the Portfolio
In terms of delinquency in the microfinance loan portfolio, the percentage of loans unpaid for more than 180 days (excluding write-offs) has increased to 9.6 percent as of March 2024, compared to 9.1 percent in March 2023, 8.4 percent in March 2022, and 4.4 percent in March 2021.
On the other hand, loans overdue by more than 30 days accounted for 2.1 percent as of March 2024, an improvement from 2.2 percent in March 2023, 6 percent in March 2022, and 9.4 percent in March 2021. Additionally, loans unpaid beyond 90 days decreased to 0.9 percent as of March 2024, down from 1.1 percent in the previous year, 2.7 percent in March 2022, and 4.2 percent in March 2021.
Growth in the Microfinance Sector
Despite the challenges with loan write-offs and delinquency, the microfinance sector has continued to see growth. The gross loan portfolio (GLP) has experienced a significant 26 percent increase, reaching Rs 4.42 lakh crore as of March 2024, compared to Rs 3.49 lakh crore in the previous year.
In terms of the distribution of the portfolio, NBFC MFIs (non-banking financial companies – microfinance institutions) hold the largest share at 39.2 percent, followed by banks at 33.2 percent, small finance banks at 16.9 percent, and NBFCs at 10.2 percent as of March 2024.
Disbursed Loans and Average Loan Size
The total value of loans disbursed has also grown, increasing by 4.62 percent to Rs 1.13 lakh crore across 2.36 crore loans during the March quarter in comparison to Rs 1.08 lakh crore across 2.52 crore loans in the preceding fiscal quarter.
Furthermore, the average loan size has slightly increased to Rs 48,200 during the March quarter in FY24, up from Rs 43,100 during the fourth quarter of FY23.
