The stress in the microcredit sector has increased as loans over 30 days due breached the double digit mark during the third quarter of 2020-21.

The portfolio at risk (PAR>30) has increased to 14.33 per cent for banks during the October-December quarter from 5.97 per cent during the July-September quarter of the fiscal.

For non-bank microfinance institutions (NBFC-MFIs), the increase was from 4.17 per cent during the second quarter to 13.36 per cent during the third quarter.

Banks and NBFC-MFIs together constitute 73 per cent of the micro credit loan outstanding as of December 31, 2020.

Small finance banks, which constitute around 17 per cent of the credit outstanding, have seen a jump in portfolio at risk from 2.75 per cent to 10.13 per cent, according to data from Microfinance Institutions Network (MFIN).

A combination of factors ranging from a lack of uniform recovery in livelihood and economic activities following the Covid-19 pandemic and lockdown, call for loan waiver of micro credit borrowers in certain states, liquidity issues with small and mid sized MFIs, delayed repayments and cash constraints at the borrowers end have contributed to the heightened risk.

While Assam and Bengal have seen stress in certain districts, other states such as Tamil Nadu and Bihar are relatively better off in terms of stress.

“After December, what we are hearing from the field level is the recovery rate has been reasonable in January and February. So, our assessment is that by March end the PAR>30 could come down to a single digit,” said P Satish, executive director, Sa-Dhan.

“The disbursements during Q3 2020-21 are around 96 per cent of Q3 2019-20, indicating that it should reach normal levels by end of Q4 2020-21," said Alok Mishra, CEO and director, MFIN.

In terms of regional distribution of microcredit, Bengal has overtook Tamil Nadu as the largest state in terms of portfolio outstanding of Rs 34,853 crore against Rs 31,520 crore of the latter for the quarter ended December 31, 2020. Tamil Nadu was ahead of Bengal during the quarter ended September 30, 2020.

Among the top 10 states, Bengal now has the highest average loan outstanding per unique borrower of Rs 55,585 followed by Assam at Rs 48,578.