NEW DELHI: It’s election season. But unlike Assam, the Trinamool Congress Party in West Bengal did not promise loan waivers, a move that has relieved not only microlenders but also commercial banks in the face of fears of a deterioration in credit values. asset quality, according to analysts at brokerage firm Jefferies.
“TMC’s election manifesto was released recently … and it’s interesting to note that it doesn’t explicitly offer any waivers for micro-borrowers, which should be a relief for microfinance institutions (MFIs) and the Bandhan. Bank, ”Jefferies said. 100 of Bandhan Bank’s microfinance portfolio, while 16 percent comes from Assam.
The waivers, according to Jefferies’ memo, do not bode well for a state’s credit culture and Bandhan Bank is one of those banks that have felt the heat. In the quarter ended in December, the pro forma gross non-performing assets (GNPA) of the Kolkata-based lender rose to 7.12 percent, much of which came from late payments on microloans.
While bank management has forecast a recovery in 2-3 months, others are not entirely sure. Much will depend on how Assam’s recently passed microfinance bill is implemented. After Assam passed the bill in December following a series of coercive lending reports, accompanied by the promise of loan forgiveness, Bandhan Bank experienced a 10 percentage point contraction in l efficiency of collection between the December quarter and January 1–16.
Collection also fell in West Bengal, but by a meager 1 percentage point. According to an Emkay report released in January, Assam has seen strong growth in disbursements in recent years, albeit on a small basis. Even a partial loan forgiveness will have a direct impact on lenders such as Bandhan Bank, analysts said.