MICROCAPITAL BRIEF: Indian Bank Credit to Microfinance Institutions Shrank 21.9% in First 9 Months of 2011

The amount of credit outstanding from Indian banks to the microfinance industry fell from April to December of 2011. The Business Standard, an Indian English-language daily newspaper, reports that microcredit dues shrank from INR 26,900 crore (USD 5.5 billion) in March 2011 to INR 21,000 crore (USD 4.3 billion) in December 2011. This equates to a 21.9 percent fall, in comparison with an increase of 32.2 percent from April to December of 2010 [1]. This negative trend partly stems from lender caution in response to slower economic growth and regulatory uncertainty. CARE Ratings, an Indian credit ratings agency, also identified a rise in bad loans as another reason for lender caution throughout the banking sector.

Compared to micro and small industry, “large industry has not been hurt by the current slump, but witnessed some moderation in credit growth at 17.1 percent.” Loans to other industries, such as tea and telecommunications, were also down compared to the previous year [1].

By Brendan Millan, Research Associate

About CARE Ratings: Founded in 1993, CARE Ratings offers credit research, analysis and ratings information forIndia’s capital market. Domestic companies and banks represent the majority of shareholders. As of June 30, 2011, CARE Ratings has a rating volume of debt of about INR 33,062 billion (USD 671.4 billion).

Sources and Resources:

[1]Business Standard: “Bank Loans to Microfinance, Telecom, Jute and Tea Firms Shrink in Apr-Dec” by B. G Shirsat and Abhijit Lele. http://business-standard.com/india/news/bank-loans-to-microfinance-telecom-jutetea-firms-shrink-in-apr-dec/464019/

MicroCapital.org Article, February 8, 2012, “Indian Finance Ministry Clears Draft Microfinance Bill, Considers Engaging Post Office Banks to Promote Financial Inclusion”, https://www.microcapital.org/microcapital-brief-indian-finance-ministry-clears-draft-microfinance-bill-considers-engaging-post-office-banks-to-promote-financial-inclusion/

MicroCapital.org Article, January 21, 2012, “State Bank of India to Grow Microfinance Portfolio by 50%, Microfinance network Promotes Wholesale Lending to Sector”, https://www.microcapital.org/microcapital-brief-state-bank-of-india-to-grow-microfinance-portfolio-by-50-microfinance-institutions-network-promotes-wholesale-lending-to-sector/

MicroCapital.org Article, November 23, 2011, “Bank Loans to Indian Microfinance Institutions slow Down in First Half of Fiscal Year”, https://www.microcapital.org/microcapital-brief-bank-loans-to-indian-microfinance-institutions-slow-down-in-first-half-of-fiscal-year/

MicroCapital Universe Profile: CARE Ratings, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=CARE+ratings

Browse the MicroCapital Universe and add your entry to the wiki at: https://www.microcapital.org/microfinanceuniverse/

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