CHENNAI: Tamil Nadu led in borrowing from microfinance institutions in the country between September 2020 and September 2021, indicating an upturn in business activity and a possible lack of access to relatively cheaper bank loans.
The 11th edition of “Microfinance Pulse”, a quarterly publication by Small Industries Development Bank of India (SIDBI) and EquifaxIndia, revealed that TN’s outstanding borrowing or lending portfolio of Rs 29,000 crore for the period accounted for 13% of total microfinance borrowing. sector in India.
Although it is convenient to borrow from microfinance institutions for a shorter period, especially when you have an order, the interest rate is quite high. The interest rate on loans offered by NBFCs is at least 3-5% higher than bank rates. “But these short-term loans from NBFCs are cheaper than usury or ‘kandu vatti,” says K. Mariappan, chairman of the Tamil Nadu Small and Tiny Industries Association.
During the pandemic, micro, small and medium enterprises in Tamil Nadu were struggling to secure funds to stay alive. Some of them feared that banks would declare them non-performing assets (NPA) if they did not repay their loans on time.
“As banks refuse to extend the term of loans, these micro-industries rely on microfinance institutions. They take out loans from non-banking financial institutions or microfinance institutions at a higher interest rate than banks to meet their payment obligations to banks,” says the president of the zone manufacturers association. industries, KV Kanakabaram.
The backlog in loan repayments during the pandemic exceeded 90 days across the country, including Tamil Nadu, according to the report. The report indicates that the microfinance sector experienced a slowdown due to the national lockdown from March 2020. The amount of loans disbursed also contracted between October 2019 and September 2020 by 28% in volume and 24% in value, according to the report. The microfinance sector has however returned to expansion mode and it grew by 35% and 37% in volume and value, respectively, between October 2020 and September 2021, according to the report.
1. Tamil Nadu leads with an outstanding portfolio of Rs 29,335 crore and contributes 13% to the total outstanding portfolio of microfinance institutions
2. As of September 30, 2021, Tamil Nadu, West Bengal, Bihar, Karnataka and Uttar Pradesh are the top five states with huge borrowings
3. MFI industry book size as of September 30, 2021 is Rs 2,26,123 crore
4. Most loans are issued in the 30,000-40,000 note size category across all quarters