Agencies such as ICRA and India Ratings have highlighted increasing delinquencies, which will push up NBFC-MFI credit costs to 320340 bps in FY25 from around 220 bps in FY24. The asset quality risks will also dampen sectorial growth and earnings in FY25. ICRA expects NBFC-MFIS' AUM growth to dip to 17-19 per cent in FY25 from 29 per cent in FY24. AUM growth in Q1FY25 was down 24 per cent Y-o-Y on the back of a 30 per cent Y-o-Y decline in Q4FY24.
The rapid growth in AUM in the last two years may have led to potential over-leverage by borrowers. Ind-Ra claims that MFI borrowers may have hit very high levels of household leverage, given improved availability of MFI loans, government loans, Kisan Credit Card loans, mudra loans, gold loans and other fintech loans. Moreover, the farmers' protests and the Karz Mukti Abhiyan in Punjab and Haryana have impacted collections and asset quality.
This story is from the September 06, 2024 edition of Business Standard.
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This story is from the September 06, 2024 edition of Business Standard.
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