The loan industry is facing many challenges these days for which the regulator has blamed poor practices. These include multiple lending by different institutions to the same borrower and charging exorbitant interest rates with the aim of increasing profits. A decline in collection efficiency has also been observed in the last few months.
The report says that defaults have increased across all types of loans and lenders, especially in the top 10 states. Nearly two-thirds of the rising bad loans are in Bihar, Tamil Nadu, Uttar Pradesh and Odisha. Meanwhile, the micro credit industry has started taking corrective action, leading to a decline in the total outstanding amount.
Credit information company ‘Crif High Mark’ says that loans outstanding for one to 30 days increased from 1.2 percent in the June quarter to 2.1 percent in the September quarter. Micro loan outstanding declined by 4.3 per cent to Rs 4.14 lakh crore in the July-September quarter of the current financial year as lenders adopted a cautious approach amid deteriorating asset quality. In a report released by Crieff High Mark, it has been said that the outstanding loans for 31-180 days increased to 4.3 percent as compared to 2.7 percent in the June quarter.
According to a report by the credit information company, the loan portfolio of non-banking financial companies (NBFCs) grew by 0.7 per cent quarter-on-quarter in the September quarter while all other segments, including banks and small finance banks, saw a decline. However, the decline in the number of borrowers with three or more active loans in the September quarter is a positive aspect. As of September, 2024, 14.3 per cent of active micro-finance borrowers had active retail loans. Of these, 37 percent were borrowers who had not paid their retail or micro-finance loans for more than 30 days.