Delinquencies in microfinance sector may push NBFC-MFI credit cost: ICRA

Increasing delinquencies in the microfinance sector is likely to push up the NBFC-MFI credit cost to 320-340 bps in 2024-25 from 220 bps in the previous financial year, according to an Icra report.

Non-banking financial companies microfinance institutions' (NBFC-MFIs) AUM growth is also likely to moderate to 17-19 per cent in the current financial year from 29 per cent in 2023-24 amid rising concerns about asset quality, it said.

The report said the robust growth in the last two years has accentuated concerns about potential overleveraging of borrowers in certain regions.

"Further, farmers' protests and the Karz Mukti Abhiyan in certain regions, especially Punjab and Haryana, have impacted collections and the asset quality.

"This, along with climatic conditions and operational challenges, including employee attrition, would keep the asset quality under pressure in the near term. As per Icra's estimates, non-performing assets (NPAs) have increased by 30 bps in Q1 FY2025," it ...