Microfinance NBFCs or NBFC-MFIs are on their way to take over banks to become the biggest microlenders, with their market share rising to 34.1 per cent as of June 2022, from 30.2 per cent a year ago.

On the other hand, the share of banks dropped to 35.6 per cent from 41.2 per cent over the same period, as per a report by CRIF.

NBFC-MFIs’ gross loan book grew 33 per cent on year to ₹97,491 crore, whereas that for banks grew only 2.1 per cent to ₹101,881 crore. Overall, the microfinance gross loan portfolio grew 18 per cent on year but was 0.2 per cent lower sequentially.

Disbursements in Q1FY23

In incremental loan originations, NBFC-MFIs led in terms of value with a market share of 35.3 per cent in Q1FY23, higher than 23.4 per cent a year ago. Share of originations of banks declined to 34.4 per cent from 55.1 per cent.

Loan originations for Q1FY23 were up 89 per cent at ₹49,788 crore, led by a 68 per cent on-year jump in the number of loans disbursed to 125 lakh.

The average ticket size of loans disbursed was ₹39,900 crore. Around 45 per cent of banks’ loans were higher than ₹50,000, whereas the figure stood at 27.2 per cent for NBFC-MFIs and 31.3 per cent for small finance banks.

The share of loans over ₹50,000 increased to 34.6 per cent from 29.4 per cent. Loans of ticket size ₹30,000-50,000 had the highest share — both in terms of value at 43 per cent, and in terms of volume at 40 per cent, data showed.

Better loan quality to aid profits, growth

Aided by the rapid growth in microfinance and improved profitability, assets under management of NBFC-MFIs and micofinance-focussed small finance banks is expected to grow 22-25 per cent in FY23, according to ICRA Ratings.

“Given the buoyant demand and the expected increase in the average ticket size (given higher loan eligibility under the new regulatory framework), the growth in the industry’s AUM in the remaining quarters is expected to improve significantly,” said Sachin Sachdeva, Vice-President and Head of financial sector ratings at ICRA.

An increase in margins because of higher pricing flexibility and reduction in credit costs is also expected to drive profitability for NBFC-MFIs.

The ratings agency expects a significant decline in delinquencies for NBFC-MFIs driven by some recoveries and write-offs, it said, maintaining its estimate of loans in the 90+ days-past-due bucket at 2 per cent by March 2023.

While on an overall basis, the 90 days-past-due figures improved for all lenders as of June 2022; the figure worsened specifically for loans under ₹15,000 and those over ₹1 lakh, CRIF said.

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