Global Statistics

All countries
235,607,128
Confirmed
Updated on 03/10/2021 6:23 pm
All countries
210,743,122
Recovered
Updated on 03/10/2021 6:23 pm
All countries
4,814,231
Deaths
Updated on 03/10/2021 6:23 pm

Global Statistics

All countries
235,607,128
Confirmed
Updated on 03/10/2021 6:23 pm
All countries
210,743,122
Recovered
Updated on 03/10/2021 6:23 pm
All countries
4,814,231
Deaths
Updated on 03/10/2021 6:23 pm

Covid 2.0 Releases Credit Stress for MFIs and Small NBFCs

The impact of the second wave of Covid has raised concerns about the recovery of microfinance (MFI) and the small NBFC sector, which was already battling high credit stress and declining AUM in fiscal year 21.

Consequently, of thirteen issuer rating downgrades made by credit rating agencies during the first quarter of fiscal 22 in the financial sector, ten issuers are smaller MFIs and NBFCs engaged in granting unsecured loans to MSMEs, personal loans and for vehicles.

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A report from Acuite Ratings said that collection efficiencies, which recovered above 90 percent in March 21, were reduced to levels between 65 and 85 percent during the first quarter of fiscal year 22.

“In addition to lower collections, the debt collection capacity of these smaller players has suffered with an estimated 50 percent of players (with a loan portfolio of more than Rs 500 crore) receiving funds. suitable “.

“The relief measures provided by the government and the RBI recently are expected to support the continuity of the flow of credit for microfinance and MSMEs borrowers, while improving liquidity relief for smaller lenders.”

In addition, he said that the impact of the second wave of Covid has been more pronounced in collections in the microfinance asset classes and loans for two-wheelers compared to the first cycle.

“Although two-wheelers as an asset class performed better during the first wave of lockdowns, the impact has been greater during the second cycle due to the spread of the pandemic in rural areas and the stress on cash flows from borrowers due to lost income as well as high medical expenses, “said Suman Chowdhury, director of analysis at Acuite Ratings & Research.

“Given the intermittent nature of economic activities following the Covid spread in the first quarter of fiscal 22, the income streams of borrowers, particularly those served by NBFCs or smaller MFIs, have been severely affected, compounding asset quality stress for these lenders. “

However, the report added that the absence of a moratorium has made the stress of the borrower more visible in this cycle and, together with the lack of adequate financing, the deterioration of liquidity and therefore the credit quality of smaller NBFCs and MFIs was almost inevitable.

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