The gross loan portfolio of the microfinance industry comprising banks, non-bank microfinance institutions (NBFC MFIs), small finance banks, NBFCs and other institutions, could touch Rs 3.25 lakh crore by March.

According to estimates by the Microfinance Institutions Network (MFIN), the gross loan portfolio of the industry was around Rs 3 lakh crore as of September with 6.2 crore unique borrowers. The loan portfolio as of March 31, 2022, was Rs 2.85 lakh crore with 5.8 crore unique borrowers.

The east and northeast India lead the regional distribution of unique borrowers with a 34 per cent share followed by south (26 per cent), west (17 per cent), north (15 per cent) and central India (9 per cent). “Given the trend, the gross loan portfolio could reach Rs 3.25 lakh crore by March 31, 2023,” said Alok Misra, CEO and director MFIN.

He was here to announce the 7th eastern India microfinance summit organised by AMFI-WB in association with PwC, MFIN and Sa-Dhan. The microfinance industry has seen a major change in 2022 with the RBI bringing in a new regulatory framework for microfinance loans.

Under the new regulations, a microfinance loan is defined as a collateral-free loan given to a household having an annual household income of up to Rs 3 lakh applicable for all players in the sector thus creating a level playing field. A major change in the regulation was the qualifying assets criteria where the minimum requirement of microfinance loans was set at 75 per cent of the total assets of the NBFC MFIs. This means that the remaining assets could be disbursed as non-microfinance credit thus allowing these lenders to diversify.

“Reducing exposure to unsecured loans from 85 per cent to 75 per cent will be of little help. If the regulator wants to make the segment resilient, it should drop it to 60 per cent,” a statement from AMFI-WB on key discussion points relating to the industry said. The industry association has also questioned the inclusion of interest charges for pricing microfinance loans.

“Most of the customers in this segment are not insured and death rates are high. Inclusive of interest charges the interest rates will be high,” the AMFI-WB statement said.