Over-leveraged borrowers put Rs 15,800 crore microfinance portfolio at risk

Kolkata: Nearly ₹15,800 crore of microfinance advances, amounting to about 5% of the total sectoral portfolio, are still held by who took loans from more than three lenders, data from Crif High Mark showed, underscoring delinquency risks in the formal credit segment most vulnerable to business cycles.

A granular analysis of the data showed that about 1.5 million have loans from four or more lenders.

Also Read:

The industry best practice is to limit loan access for an individual borrower to a maximum of three microfinance lenders.

What’s more worrying is the quantum of individual exposure of these 1.5 million borrowers and the impact of their lack of access to further credit on system-level repayment commitments. suggest these borrowers have more than ₹1 lakh outstanding loans on an average – more than double the balances applicable to the average microfinance customer.

“Those who have taken loans from more than three borrowers are not getting fresh loans under the guardrails being followed by every microfinance lender since July 2024,” said the chief executive of a leading non-banking finance company-microfinance institution (), requesting anonymity. “Therefore, a sizable chunk of them are not able to smoothen the repayment pressure they are carrying and this makes them susceptible to default.”

That explains the asset quality question mark on the nearly ₹15,800 crore of loans taken from multiple lenders, people aware of the market said. Customers taking unsecured loans from more than three lenders are considered the most vulnerable with regards to their repayment commitments.

Also Read:

About 10% of this amount has been in default for more than 30 days to 180 days, data showed. Data on these loans remaining unpaid over 180 days was not available immediately.

To be sure, about 5.15 million borrowers who have taken loans from three lenders showed a better repayment record. Their cumulative outstanding stood at ₹49,374 crore at the end of March while 5% of it remained unpaid for 31 to 180 days.

The best credit discipline is being practised by 62.2 million customers with one or two loans. They have a cumulative ₹2.66 lakh crore loan outstanding with 2.3% of remaining unpaid for 30-180 days, Crif data showed.