Business & Investment

Covid 2.0 Unleashes Credit Stress on MFI, Small NBFC

New Delhi: The impact of the second Covid wave raises concerns about the recovery of microfinance (MFI) and small businesses. NBFC Sectors that were already fighting the overpass Credit stress And decline AUM 21st year.

Therefore, of the 13 issuer downgrades by credit rating agencies in the financial sector in the first quarter of 2010, 10 issuers are small MFIs and NBFCs engaged in unsecured offerings. MSME Loans, personal loans, vehicle loans.

Report by Sensitive evaluation He said collection efficiencies, which were seen to recover by more than 90% in March 2009, fell to levels of 65-85% during the first quarter of 2010.

“In addition to the smaller collections, the debt collection capabilities of these smaller players were affected by the fact that an estimated 50 percent of the players (who have a loan portfolio of 500 chlores or more) received sufficient funding. . ”

“Relief measures recently provided by the government and RBI are expected to support the continuity of credit flows to microfinance. MSME Borrower We will also strengthen liquidity easing for small lenders. ”

He added that the impact of Covid’s second wave is more pronounced in the collection of microfinance and motorcycle loan asset classes compared to the first cycle.

“Even if motorcycles as an asset class work well during the first wave of blockade, the spread of pandemics in rural areas, loss of income and high medical costs,” he said. Suman Choudhry, Chief Analyst of Acuite Ratings & Research.

“Given the intermittent nature of economic activity after the spread of Covid in the first quarter of 2010, the sources of income for borrowers, especially those served by smaller NBFCs or MFIs, were severely affected. Exacerbates the asset quality stress of these lenders. ”

However, the report states that the lack of moratorium makes borrowers stress more apparent in this cycle, and along with a lack of sufficient funding, reduced liquidity and thus minor credit quality deterioration of NBFC and MFI is largely avoided. I added that.

Covid 2.0 Unleashes Credit Stress on MFI, Small NBFC Covid 2.0 Unleashes Credit Stress on MFI, Small NBFC

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