Non-bank microfinance institutions seek meeting with lenders on extension of loan moratorium

With the microfinance sector in Assam being hit hard due to a drastic decline in collection efficiency due to the devastating floods, Non-Banking Microfinance Institutions (NBFC-MFIs) approached the State Bank of India ( SBI), the organizer of the State Level Bankers’ (SLBC), to convene a meeting to extend the loan moratorium facility to affected borrowers.

“Collections have been affected in flood-affected areas because microfinance managers are unable to collect repayments from borrowers. Officials are unable to reach flood affected areas,” Manoj Kumar Nambiar, MD, Arohan Financial Services, told FE.

Nambiar said NBFC MFIs have written to State Bank of India to call a meeting of SLBC. “For a natural calamity situation, there is an RBI waiver whereby once SLBC has declared it a natural calamity, customers have the option of requesting a 30 day, 60 day or maximum 90 day moratorium on refunds . The SLBC must document with the state government and the banking community that this is a natural calamity and that customers need help. Then the RBI waiver will come into effect,” he said. Currently, there are up to 39 NBFC-MFIs (Non-Banking Financial Corporations-Microfinance Institutions) in the state.

According to Nambiar, even before the flood, the efficiency of microfinance loan recovery in Assam was much lower than in other states. “In Assam, collection efficiency in terms of full and partial repayments was around 75-80% before the flood, while on a pan-India basis it was over 90%. Over the past month, collection efficiency has dropped further in the state,” he added.

Notably, the microfinance loan portfolio for all lenders, including banks and small financial banks, in Assam is currently around Rs 9,000 crore.

“People in Assam normally face floods and cyclones. These types of natural disasters typically impact microfinance recoveries for two to three weeks. After that, things go back to normal. In the current situation, microfinance clients are not defaulters because officials are unable to reach them,” a source from the microfinance industry told FE.

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