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Banks give NBFCs the upper hand in microfinance

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<p><strong>MUMBAI:</strong> In September 2023, banks’ proportion of outstanding loans to microfinance enterprises fell from 40% in September 2021 to 31%. During the time, banks have lost market share to non-banking financing firms and small finance banks, while the share of these lenders has increased.<br />
Due to a credit crisis that finance businesses were experiencing during the start of the pandemic, NBFCs (microfinance companies) lost market share in lending.</p>
<p><img decoding=”async” class=”alignnone wp-image-418300″ src=”https://www.theindiaprint.com/wp-content/uploads/2024/02/theindiaprint.com-banks-give-nbfcs-the-upper-hand-in-microfinance-107804312.png” alt=”theindiaprint.com banks give nbfcs the upper hand in microfinance 107804312″ width=”1065″ height=”599″ title=”Banks give NBFCs the upper hand in microfinance 27″ srcset=”https://www.theindiaprint.com/wp-content/uploads/2024/02/theindiaprint.com-banks-give-nbfcs-the-upper-hand-in-microfinance-107804312.png 400w, https://www.theindiaprint.com/wp-content/uploads/2024/02/theindiaprint.com-banks-give-nbfcs-the-upper-hand-in-microfinance-107804312-390×220.png 390w, https://www.theindiaprint.com/wp-content/uploads/2024/02/theindiaprint.com-banks-give-nbfcs-the-upper-hand-in-microfinance-107804312-150×84.png 150w” sizes=”(max-width: 1065px) 100vw, 1065px” /></p>
<p>Additionally, RBI switched to activity-based regulation, harmonizing several banking and finance company regulations.<br />
MFIs have, however, recovered and are again expanding faster than the sector throughout the last two years. Their loan book has increased by 86% in the last two years, compared to just 19% growth for banks and 77% growth for small financing institutions.<br />
A credit bureau assessment on the business, CRIF Microlend, said that banks owed the MFI segment Rs 1.2 lakh crore in unpaid loans. In contrast, as of September 2023, MFIs had a loan book of around Rs 1.5 lakh crore, while small finance banks had Rs 72,873 crore.</p>
<p>By the end of September 2021, two years before, banks’ MFI portfolio was just over Rs 1 lakh crore, MFIs were valued at Rs 79,595 crore, and small financing banks were valued at Rs 41,158 crore.<br />
Small ticket loans to people at the bottom of the pyramid are the main emphasis of MFIs. Because these loans fall within the priority sector, banks are also involved in this market. The majority of small financing banks were first licensed MFIs before becoming banks.<br />
according of September 2023, the total loan portfolio climbed by 26% to Rs 3.8 lakh crore from Rs 3 lakh crore, according per the report.</p>


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