SFBs' MFI stress set to ease in 2-3 qtrs

The stress in the microfinance portfolios of small finance banks (SFBs) is likely to ease in the coming months, with the sector likely to be 'out of the woods' in the next two to three quarters, chiefs of two such lenders said on Wednesday.

- BS REPORTER

They were speaking at a session on "Are SFBs ready to convert to universal banks?", moderated by Subrata Panda of Business Standard.

Inderjit Camotra, managing director (MD) and chief executive officer (CEO) of Unity SFB, said the microfinance industry and self-regulatory organisations (SROs) had recognised about 18 months ago that multiple loans were being extended to the same woman (at times up to five to seven loans), much beyond her repayment capacity.

"It took the microfinance industry a few quarters to recognise that we have actually done this too hard," said Camotra. "When the SROs met, we decided not to lend more than three loans to the same woman and not more than ₹1.75 lakh in total outgo. This norm has been adhered to in the last 12-15 months. While the old book has many loans to be repaid, there is a new book with newer underwriting standards, which is more sensible," Camotra said.