“We are not lending in UP till the whole thing dies down,” said Samit Ghosh, managing director at Ujjivan Microfinance. “We faced problems in some spots of Uttar Pradesh. It was politicised and parties were asking people not to repay and ask for waiver or repayment holiday,” he said.
Microfinance institutions (MFIs) said similar rumours are being spread in some parts of Maharashtra, too. “Overall collection is down partly because it has got politicised,” said Raman Aggarwal, chairman at Finance Industry Development Council (FIDC), a self-regulatory organisation for non-banking finance companies (NBFCs).
Industry officials said misunderstanding of the Reserve Bank of India’s circular on November 21, giving additional 60 days for banks and NBFCs, including MFIs, to consider loan accounts of up to Rs 1 crore as non-performing assets (NPAs), added to the confusion.
“It is the banks and NBFCs who have been allowed not to treat a loan account as NPA (non-performing asset) even if it remains overdue for a period of 60 days over and above the limit prescribed by RBI,” said Aggarwal.
Microfinance companies across the country have seen a dip in lending post November 8 when Prime Minister Narendra Modi announced demonetisation of Rs 500 and Rs 1,000 currency notes, mainly because collections from some states have come down. Credit demand, too, has slowed down.
Ujjivan, one of the largest MFIs in the country with operations in 24 states, disburses Rs 700 crore loans every month, and this month it has done close to Rs 500 crore. Manoj Nambiar, MD at Kolkatabased Arohan Microfinance, said collections have come down to 20 per cent.
“But it is now coming back to normal,” he said. “Each of the branches need Rs 10-15 lakh a day. We are disbursing what we generate in repayment,” he said. Imposition of a cap of Rs 50,000 per week on MFIs, too, has impacted fresh microfinance loan disbursements.
Source: The Economic Times