The collections of microfinance institutions may be impacted by the fresh lockdowns in many states because of the resurgence of the coronavirus.

India’s largest state by state domestic product — Maharashtra — has announced mini-lockdowns till the end of the month. Many others have announced night curfews and weekend lockdowns.

According to a Crisil report, Maharashtra is among the top five states in microfinance loans with assets under management of around Rs 16,700 crore as on December 2020, which are around 7 per cent of all microfinance loans.

The share of non-banking finance company microfinanciers (NBFC-MFIs) is 40 per cent or around Rs 6,700 crore.

Collection efficiency in the state has been relatively lower at 85-90 per cent even before the latest curbs compared with the all-India average of 90-94 per cent in December 2020.

“The sector’s collection efficiency has stalled at 90-94 per cent in the past few months compared with the pre-pandemic level of 98-99 per cent. These mini-lockdowns can restrict improvement in the coming months,” said Krishnan Sitaraman, senior director & deputy chief ratings officer, Crisil Ratings.

“However, NBFC-MFIs have been allowed to continue operations in Maharashtra unlike during the most stringent lockdown phase early last fiscal. Since microfinance requires high personal connect, this comes as a big relief,” he said.

In terms of asset quality, the sector’s portfolio at risk — loans unpaid for more than a month — stood at around 11 per cent from 2.5 per cent a year back, reflecting the impact on the borrower segment because of the economic challenges faced last fiscal. PAR was slightly higher at 13 per cent in Maharashtra.

“If more states follow Maharashtra and impose mini-lockdowns of their own to curb the pandemic, and these continue for an extended period, PAR recovery would be affected,’’ the rating agency cautioned.

Unlike the last fiscal, the disruptions in economic activity are expected to be relatively moderate. Many borrowers of MFIs cater to essential services that continue to operate as usual, and their cash flows could be curbed to some extent.

Analysts said they were monitoring the asset quality and the collections of the NBFC-MFIs, though they are better prepared to deal with the situation because of their experience of the last lockdown.

Most lenders have already made provisions of 2-5 per cent of their loan books during the nine months ended December 2020. However, Crisil said current situation may need higher provisioning.