Lok Sabha Question No. 157 (UNSTARRED), answered on 2021-07-19
Subject: Credit by Microfinance Companies
Ministry: FINANCE
Asked by: Maneka Sanjay Gandhi

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## DEPARTMENT OF FINANCIAL SERVICES

## LOK SABHA

## UN-STARRED QUESTION NO. 157

TO BE ANSWERED ON 19 th  July, 2021 / ASHADHA 28, 1943 (SAKA)

## Credit by Microfinance Companies

## 157 : SHRIMATI MANEKA SANJAY GANDHI

Will the Minister of FINANCE be pleased to state:

- (a) the amount of credit extended through microfinance companies during the period from 2000 till now;
- (b) the amount out of the same classified under stressed assets till now; and
- (c)  the  details  of  the mechanisms introduced to deal  with the issue of stressed assets with respect to microfinance companies?

## ANSWER

## MINISTER OF STATE IN THE MINISTRY OF FINANCE

## (Dr. BHAGWAT KARAD)

(a) & (b): Reserve Bank of India (RBI) is the regulator of microfinance entities which are having corporate (company)  legal  structure  i.e.  Non-Banking  Financial  Companies  (NBFC-MFIs).  As  informed  by  RBI details of loans & advances and stressed asset of such NBFC-MFIs (with asset size of above Rs. 500 crore) are available only from FY 2009-10 to FY 2020-21 and the same is placed at Annexure I .

(c) :  As  per  RBI's  Prudential  Framework  for  Resolution  of  Stressed  Assets  dated  June  07,  2019,  as applicable to Micro Finance Companies, the fundamental principles underlying the regulatory approach for resolution of stressed assets are as under:

- (i)  Early recognition and reporting of default in respect of large borrowers by lenders;
- (ii)    Complete discretion to lenders with regard to design and implementation of resolution plans, subject to the specified timeline and independent credit evaluation;
- (iii)    Harmonised  framework  for  resolution  of  stressed  assets,  in  supersession  of  all  earlier resolution schemes;
- (iv)  A system of disincentives in the form of additional provisioning for delay in implementation of resolution plan or initiation of insolvency proceedings;
- (v)    Withdrawal  of  asset  classification  dispensations  on  restructuring.  Future  upgrades  to  be contingent on a meaningful demonstration of satisfactory performance for a reasonable period;
- (vi)  Signing of inter-creditor agreement (ICA) by all lenders to be mandatory, which will provide for a majority decision making criteria.

In  addition,  Government  has  announced  a  'Credit  Guarantee  Scheme  for  MFIs'  to  provide  guarantee cover  to  banks  /lending  institutions  for  loans  to  MFIs,  for  on  lending  to  approximately  25  lakh  small borrowers. The scheme, inter-alia, provides for guarantee cover to the extent of 75% of default amount with rate of interest on loans from Banks capped at Marginal Cost of Lending Rates plus 2%, and rate of interest to small borrowers at least 2% below maximum rate prescribed by RBI.

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Annexure-I  referred  in  reply  to  Lok  Sabha  Un-starred  Question  No.  157  for answer on 19 th July, 2021 regarding Credit by Microfinance Companies

| Loans & advances and stressed asset of NBFC-MFIs (with asset size of above Rs. 500 crore) Amount in Rs. Crore   | Loans & advances and stressed asset of NBFC-MFIs (with asset size of above Rs. 500 crore) Amount in Rs. Crore   | Loans & advances and stressed asset of NBFC-MFIs (with asset size of above Rs. 500 crore) Amount in Rs. Crore   |
|-----------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------|
| Financial Year                                                                                                  | Gross Loans and Advances                                                                                        | Stressed Assets                                                                                                 |
| 2009-10                                                                                                         | 6,546                                                                                                           | NA                                                                                                              |
| 2010-11                                                                                                         | 11,563                                                                                                          | NA                                                                                                              |
| 2011-12                                                                                                         | 9,069                                                                                                           | 3,551                                                                                                           |
| 2012-13                                                                                                         | 11,771                                                                                                          | 3,361                                                                                                           |
| 2013-14                                                                                                         | 14,349                                                                                                          | 3,073                                                                                                           |
| 2014-15                                                                                                         | 21,081                                                                                                          | 2,724                                                                                                           |
| 2015-16                                                                                                         | 34,187                                                                                                          | 2,704                                                                                                           |
| 2016-17                                                                                                         | 39,480                                                                                                          | 3,143                                                                                                           |
| 2017-18                                                                                                         | 41,444                                                                                                          | 3,114                                                                                                           |
| 2018-19                                                                                                         | 51,992                                                                                                          | 2,252                                                                                                           |
| 2019-20                                                                                                         | 59,349                                                                                                          | 1,986                                                                                                           |
| 2020-21                                                                                                         | 68,254                                                                                                          | 3,571                                                                                                           |

Source: RBI