Assam micro loan waiver promise derails repayment

KOLKATA: The poll promise of waiving microfinance loans has hit the credit behaviour in Assam hard.
Bandhan Bank, the largest microfinance lender, has seen its collection efficiency dipped news24nationificantly after BJP, the ruling party in Assam and its principal opposition Congress made micro loan waiver as major poll plank. Assam is set to elect a new government later in the year.

Bandhan Bank’s collection efficiency fell 78% in the first 16 days of the year from 88% at the end of December. The bank’s collection efficiency in value for the entire country dipped to 90% from 92% in the same period.

The microfinance business in the northeastern state has been facing repayment issues since November 2019 due to socio-political activism.

Assam contributes about 8% to Bandhan’s total advances Rs 80,255 crore.

The bank’s chief executive Chandra Shekhar Ghosh said repayment took a temporary hit as it happens every time political parties make such populist announcements.

“It would stabilise in the future as borrowers know the importance of a good repayment record and that a good credit score helps in getting future loans,” he said.

Assam has another 45 microfinance institutions operating in the states with about Rs 12,000 crore portfolio. Arohan Financial Services accounts for 8% of it while Ujjivan Small Finance Bank and Satin Creditcare Network contribute 3% each, according to Emkay Global Financial Services.