Bad Loans To Bother Microfinance Industry For Two More Quarters, Says MAS Financial Chairman

The stress in terms of bad loans in the microfinance industry is expected to stay for at least two more quarters, said MAS Financial Services Ltd.'s Chairman and Managing Director Kamlesh Gandhi.

However, he asserted that the leading non-banking financial company does not see its gross non-performing assets breaching the 2.5% mark.

In the quarter ended September, MAS Financial Services Ltd. reported a gross NPA of 2.36%, up from 2.17% on a year-on-year basis. The net NPA of the NBFC rose 10 basis points to 1.47% on a yearly basis.

On the the microfinance sector's bad loans rising in the recent months, Gandhi told NDTV Profit, “We expect another at least two quarters to be tough on the industry because one thing goes bad, it does not recover so fast. As far as we are concerned, we don't see us breaching that range of 2.5%. It will be between 2.25% to 2.5%.”

The NBFC had earlier targeted its GNPA to the range of 2.25% and 2.5% in a quarter. Gandhi noted that when there is a widespread asset quality issue, the company also faces pressures to a certain extent.

“We always talk about ranges for this very reason that, if the macro situations are not so favourable, we might be at the upper end of the spectrum. When things are good, we might be at the lower end,” the top executive explained.

“This is the retail stress that we are seeing, but it is quite within the manageable levels with the reason being that we have been very circumspect about extending the credit,” he added.

Gandhi opined that the stress in asset quality was due to “the aggressive lending and overleverage of the borrowers”.

He added, "What we usually do at this point of time is to engage with the borrowers very closely, tighten our credit screens, and see how we extend credit where it is due. This is what we have followed over all these years.”

In the next two quarters, he expects things to settle down. “Currently, (it) is the time to be more circumspect. And over a period of next quarters, quarter or two, we see things settling at the ground level,” Gandhi added.

On Tuesday, shares of MAS Financial Services Ltd. closed 1.73% higher at Rs 282.9 apiece on the NSE, compared to the benchmark Nifty 50 settling nearly flat at 24,194.5 points, down 0.11%.