Rising Delinquencies in Microfinance: A Sign of Rural Economic Distress
UPSC Relevance
Prelims: Indian Economy (Financial Inclusion, Microfinance, Banking - Non-Performing Assets (NPAs), Self-Regulatory Organisations).
Mains:
General Studies Paper 2 (Social Justice): Welfare schemes for vulnerable sections of the population; Issues relating to poverty and hunger.
General Studies Paper 3 (Economy): Indian Economy and issues relating to growth, development; Inclusive growth and issues arising from it. The health of the microfinance sector is an indicator of the financial health of the low-income population.
Key Highlights from the News
Microfinance loan delinquencies in India sharply increased in the 2024-25 financial year, according to a Sa-Dhan report.
The Portfolio at Risk (PAR 30+) rate, for loans overdue by more than 30 days, rose to 6.2% from 2.1% in the previous year.
Loans overdue by more than 90 days, categorized as Non-Performing Assets (NPA), also increased from 1.6% to 4.8%.
Rural borrowers were most affected by repayment defaults.
This problem is severe in states like Bihar.
These figures indicate growing financial distress and a decline in income across the country, especially in rural areas.
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