Recovery of Microfinance Industry from Note Ban

After the government announced note-ban on November 201, loan repayment took a critical hit I the cash-based sector. The situation got worse when the government also announced a farm loan waiver which saw small borrowers in five states including Maharashtra and Uttar Pradesh stop repaying loans. In the eastern part of Maharashtra, the Vidarbha region suffered 35% of the loan write-offs.

Bandhan Bank managing director Chandra Shekhar Ghosh said at the Eastern India Microfinance Summit that there had been difficulties in the collection of debts after the announcement of demonetization, but they were gradually petering out. However, they had not made substantial write-offs.

Ujjivan Small Finance Managing Director Samit Ghosh said that things would improve at the end of the fiscal as they are on the last leg of the demonetization effect. The holding firm for the small bank, Ujjivan Financial Services, has written off loans worth Rs 300 crore.

Kolkata-based Village Financial Services a microfinance industry that was adversely affected by the demonetization has a Rs 510 crore portfolio. It intends to expand to states such as Mahya Pradesh and Jharkhand. Citing that, the microfinance industry will take another six months for full recovery from the blow.

According to Ratna Vishwanathan, former CEO of Microfinance Institutions Network-MFIN, non-performing assets have dropped from 23 percent after the demonetization to 4 percent now, in one year and this is expected to fall further to 2 percent onwards.

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