Huge NPA load may close down local Microfinance Institutions in Assam

STAFF REPORTER

GUWAHATI: Many local Microfinance Institutions (MFIs) may face closure in the coming days even as Dispur has proposed a budgetary allocation of Rs 7500 crore to repay loans taken by lakhs of women.

Sources in the MFIs said nearly 60 per cent MF loans disbursed to women in the State have become Non Performing Asset (NPA). NPA refers to a classification for loans or advances that are in default or in arrears. A loan is in arrears when principal or interest payments are late or missed.

"Repayment of loans by the Assam Government will particularly help the large MFIs which are operating in different parts of the country. Local MFIs will not be hugely benefitted and they will continue to face financial losses. The funding of these local institutions comes from borrowings from banks and all India financial institutions like NABARD/SIDBI. Local MFIs are taking money from all India financial institutions at a very high rate of interest. Such high level of unpaid loans will imply local MFIs will default to banks and all India financial institutions. The development will result in creating a systemic financial instability issues as, which will ultimately stop credit flow to Assam. The development will result in closure of many local MFIs in future," a senior official associated with MFIs said.

The official said majority of women borrowers whose MF loans have become NPA, 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," he said.

The official said 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.

Also Read: Women laud move to waive microfinance institutions loans

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