Rising Delinquencies to Impact Microfinance Sector: Icra Report

According to an Icra report, increasing delinquencies in the microfinance sector are set to raise the NBFC-MFI credit cost in 2024-25. AUM growth is expected to moderate due to concerns about asset quality. Factors such as farmer protests, regional operational challenges, and climatic conditions contribute to the pressure on asset quality.

According to an Icra report, rising delinquencies in the microfinance sector are poised to increase the NBFC-MFI credit cost to 320-340 basis points in 2024-25 from 220 basis points in the previous fiscal year.

NBFC-MFIs' AUM growth is projected to slow down to 17-19 percent in the current financial year from 29 percent in 2023-24 amid growing concerns over asset quality, the report highlighted.

Farmer protests and the Karz Mukti Abhiyan, particularly in Punjab and Haryana, along with climatic challenges and employee attrition, are impacting collections and asset quality. Icra forecasts that non-performing assets (NPAs) have risen by 30 basis points in Q1 FY2025.

(With inputs from agencies.)