Mumbai: Banks’ share in arrears Loan To microfinance Companies have fallen from 40% in September 2021 to 31% in September 2023. banks Lost it market share For non-banking finance companies and small finance banks, both these categories of lenders increased their share during this period.
NBFC (Microfinance companies) had lost market share in loans due to the credit crunch faced by finance companies during the onset of the pandemic. RBI had also made changes to activity-based regulation, harmonizing many rules for banks and finance companies.
However, in the last two years, MFIs have made a comeback, growing faster than the industry. In two years, their loan book has grown by 86%, while banks have grown by only 19%, and small finance banks have grown by 77%.
According to CRIF Microlend, a report on the industry by credit bureaus, banks had loan outstanding of Rs 1.2 lakh crore in the MFI segment. In contrast, MFIs had a loan book of about Rs 1.5 lakh crore as of September 2023, while small finance banks had Rs 72,873 crore.
Two years ago, at the end of September 2021, the MFI portfolio of banks stood at a little over Rs 1 lakh crore, with MFIs at Rs 79,595 crore and small finance banks at Rs 41,158 crore.
MFIs focus on providing small ticket loans to people at the bottom of the pyramid. Banks are also active in this sector as these loans qualify for priority sector. Most small finance banks were originally MFIs that obtained a bank license.
According to the report, the gross loan portfolio has increased by 26% to Rs 3.8 lakh crore by September 2023, from Rs 3 lakh crore two years ago.