Mumbai: Ujjivan Small Finance Bank on Friday said it is looking to sell Rs 270 crore worth of non-performing and written-off micro-banking loans to asset reconstruction companies (ARCs).
Of the Rs 270 crore worth of loans, around Rs 208 crore are non-performing loans, and the remaining Rs 62.36 crore worth of loans have been written off by the bank.
The bank said it is carrying an overall provision of 85.61 per cent on the pool of micro-banking loans it is looking to sell.
In the last quarter, several NBFC-Micro Finance Institutions including Small Finance Banks and several large banks such as Kotak Bank, IndusInd Bank, RBL Bank, and Bandhan Bank, reported a rise in default rates in microfinance loans (collateral-free loans to those with annual income of Rs 3 lakh).
According to a report of Motilal Oswal, the current state of the MFI sector can be attributed to several factors, including but not limited to customer overleveraging and inability to repay, resulting in low center meeting attendance; lending to customers with multiple fake voter ID cards categorized as new-to-credit (NTC) customers; defaults from ‘Ring Leaders’ or ‘Intermediaries’ in some pockets of the country; high attrition at the field officer and even branch manager levels; and heavy rainfall and/or floods in certain regions that adversely impacted customer earnings and even their repayments. Not all of these reasons are mutually exclusive, and there is a fair possibility that one could be a cause of the other.
