Microfinance Industry Declines 4% Amid Rising Defaults in Q2 FY25

Economy

1 year ago

News sources:

Credited from: INDIATIMES

The **microfinance industry** experienced a **4% shrinkage** in Q2 FY25 due to a rise in loan defaults, with delinquency rates increasing to **4.3%**.
Factors contributing to this decline include a **decrease** in the number of borrowers with multiple loans and a year-on-year growth of **7.6%** in the microfinance portfolio.
In response to these challenges, **MFIs** requested a **credit guarantee scheme**, a special fund for the Northeast, and changes in qualifying asset norms to mitigate risks during a recent meeting.
The meeting highlighted the importance of **enhancing financial practices** and promoting digital repayment methods to address industry stress and improve governance.
Delinquencies have notably increased across various categories of loans, particularly affecting **small finance banks**, with certain states contributing significantly to the rise in non-performing loans.

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