However, these loans could be worth acquiring if sold at the right price, particularly on a cash-to-security receipts (SRs) basis rather than a full cash basis.
Industry-wide stress in the microfinance sector has built up due to unchecked credit growth and multiple loan disbursements to the same customers, resulting in overleveraging among borrowers.
As delinquencies rise, major banks and microfinance-focused NBFCs are selling off non-performing loans. Recently, IndusInd Bank invited bids from ARCs to offload ₹1,573 crore of non-performing microfinance retail loans from over a million accounts. The bank has invited bids on a full cash basis (100 per cent cash basis) and set a reserve price of ₹85 crore, translating into a recovery of 5.04 per cent for the bank.
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