Addressable market potential for microfinance institutions, which are classified as non-banking financial institutions, will jump from ₹1.40 lakh crore to ₹2.50 lakh crore as a result of the increase in permissible total debt per borrower, according to credit rating agency ICRA.
It estimated that the portfolio of NBFC-MFIs portfolio could cross ₹1 lakh crore by March 31, 2018. Borrowers’ dependence on moneylenders could come down with increased capacity of MFIs to lend.
According to the RBI’s revised guidelines for NBFC-MFIs, total indebtedness of a borrower, excluding educational/ medical expenses, not to exceed ₹1 lakh (raised from the present limit of ₹50,000).
Loan disbursed to a borrower with a rural household annual income not exceeding ₹1,00,000 (enhanced from ₹60,000) or urban and semi-urban household income not exceeding ₹1,60,000 (enhanced from ₹1,20,000).
Disbursement of the loan amount not to exceed ₹60,000 (enhanced from ₹35,000) in the first cycle and ₹1,00,000 (up from ₹50,000) in subsequent cycles.
Aggregate amount of loans, given for income generation, is not less than 50 per cent of the total loans given by the MFIs.
“Increase in ticket sizes could reduce operating expense percentage by around 80-110 bps, assuming part of this is passed on to borrower, return on equity for MFIs could improve by around 200-400 bps over medium term,” ICRA said.