ICRA Rating Agency Lowers MFI Asset Growth Estimate to 12-14% for FY22


Reflecting the effect of the second wave of Covid-19 infection, the rating agency ICRA revised down the estimated asset growth of NBFC-MFIs to 12-14% for FY22 compared to the previous projection of 22-25%.

However, growth is expected to improve to 18-22% in FY2023, although the recent surge in Covid-19 (third wave) infections poses a risk to estimates. The long-term outlook for non-bank financial corporations-microfinance institutions (NBFC-MFIs) should remain strong. This would be motivated by

Disbursements are expected to continue in the third quarter of fiscal 2022, following the resumption in the second quarter of fiscal 2022.

Sachin Sachdeva, Vice President and Sector Head, Financial Sector Ratings, ICRA, said the disruptions caused by the second wave impacted industry growth in the first half of FY22. significantly hampered the movement of people and entities focused on collections rather than disbursements.

Assets under management (AUM) of NBFC-MFIs grew five percent annualized in the first half of FY2022 to reach Rs 82,749 crore as of September 30, 2021 from Rs 80,549 crore as of March 31, 2021 (73,792 crore rupees as of March 31, 2020).

Asset quality metrics weakened quite sharply in the first half of FY2022 due to localized lockdowns imposed by various states/union territories (UTs) due to the second wave, which impacted on borrowers’ cash flows and therefore on the effectiveness of collection (CE).

With the gradual opening of the economy, microfinance activities resumed in the second quarter of fiscal 2022 and collections also rebounded to the level of March 2021.

Delinquencies had increased significantly in May-June 2021, however, with gradual restructuring and some recovery in CE, reported delinquencies decreased as of September 30, 2021, although they remained elevated from the March 2021 level.

In addition, MFIs-NBFCs had restructured approximately 10.7% of their assets under management as of September 30, 2021, the performance of which remains controllable.

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