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Post demonetisation, the delinquencies in microfinance institutions (MFI) loan books are rising. Ratings agency ICRA recently downgraded its outlook on two prominent MFIs to negative from stable, mainly due to limited currency supply and disruption in borrower cash flows, which hampered overall the collection efficiency of these lenders.

ICRA downgraded to negative from stable its outlook on Janalakshmi Financial Services Ltd (JFSL), which has a presence in 222 cities across 17 states and two Union Territories. Janalakshmi has asset under management of Rs12,416 crore and had registered a high compound growth of 130% over the past four years.

“The revision in outlook factors in the adverse impact of demonetisation on JFSL’s asset quality, where overall collections efficiency is affected by the limited currency supply, disruption in borrower cash flows, and political intervention in certain states, namely, Uttar Pradesh, Maharashtra and Madhya Pradesh. The company’s collection efficiency dipped to 78% in January 2017, from about 98% in September 2016. The company’s disbursements were also impacted because of the limited availability of currency; thus, the disbursements moderated to about 55% (November 2016), 31% (December 2016) and 60% (January 2017) of its average disbursements for seven months of FY2017,” the ratings agency says.