Microfinance Companies in India Seek Life Support
With demonetisation being the black swan event for the microfinance industry, players are hard-pressed as they reel under cash-flow issues. From Equitas, with a large exposure to south India, to the more northbound Ujjivan, Bharat Financial Inclusion, Bandhan Bank, Arman, Janalakshmi — micro finance institutions (MFIs) and small finance banks have seen their asset quality deteriorate as profits slide and bad loans rise. Adding fuel to the fire are farm loan waivers from state governments.
“Farm loan waivers announced by states have affected repayment discipline. There has been a sharp slowdown in the microfinance business. We will be diversifying our product portfolio to be able to sustain ourselves over a longer period,” N Rangachary, chairman, Equitas, recently told shareholders, while presenting the company’s annual report. Rangachary was a former insurance regulator.