OVER 50% OF MF LOANS TURN NPAs
STAFF REPORTER
GUWAHATI: Over 50 percent of microfinance (MF) loans disbursed to women in Assam have become Non Performing Assets (NPAs).
The NPA refers to a classification for loans or advances that are in default or arrears. A loan is in arrears when principal or interest payments are late or missed.
"Around 42% of microfinance clients had become NPA – with overdue more than 90 days by 31 March 2021. The figures have increased and have expected to touch 55% by the end of June 2021. These clients having NPA status in their credit records will get excluded from formal sector finance (banks, MF institutions and other financial institutions). These MF borrowers will not receive any kind of loan from the formal sector of finance in future. They will have to approach private and informal lenders where they will have to pay a very high rate of interest," a source in the MF sector told The Sentinel.
Sources said the majority of women borrowers whose MF loans have become NPAs, are in a position to repay their monthly instalments. "But most of the women have stopped repaying expecting that the Assam Government will waive their loans," the source said.
The Assam Government recently set various terms and conditions to waive microfinance loans of 26 lakh female borrowers in the State. Waiving of microfinance loans taken by women was one of the major issues of the ruling BJP during the Assembly election campaigns this year.
While the cut-off year and date for the microfinance loan waiving scheme will be December 31, 2021, the Assam Government will not consider those loans which became NPA for the micro-finance institutes and banks before the same deadline.
Many MF Institutions are now suffering heavy financial losses as they have to make provisions against NPAs as per the Reserve Bank of India regulation. The funding of these institutions comes from borrowings from banks and all Indian financial institutions like NABARD/SIDBI and public deposits, including from Assam.
"Such high level of unpaid loans will imply Non-Banking Financial Companies (NBFCs) and MFIs will default to banks and all India financial institutions. The development will result in creating systemic financial instability issues as, which will ultimately stop credit flow to Assam," a senior official of a leading MF institution said.
The official said the local MF institutions working in Assam exclusively are likely to face serious issues if the situation persists.
"Besides, 26 lakh clients, with an estimated 40 lakh employment, over 12,500 local youth employed by the microfinance sector are also facing a serious threat to their livelihood," the official said.