Covid-19: Night curfews, Mini-lockdown casts cloud over MFI collections
Covid-19: Night curfews, Mini-lockdown casts cloud over MFI collections
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MUMBAI: States have once again started imposing restrictions to prevent the spread of Covid-19 virus. Maharashtra, which is seeing the maximum number of cases, has announced the most stringent one -- a mini-lockdown through April 30. Many other states have also announced night curfews and weekend lockdowns.

In Indore, a week-long lockdown imposed till next Friday. Markets will remain open only for three hours till 9 am every day. District collector Manish Singh may make a formal announcement in this regard soon keeping in view the steep rise in Covid cases in city.

Lockdowns can restrict improvement in the coming months. However, NBFC-Micro Finance Institutions (MFIs) have been allowed to continue operations in Maharashtra unlike during the most stringent lockdown phase early last fiscal.

Since microfinance requires high personal connect, this comes as a big relief." In terms of asset quality, as of December 2020, the sector's 30+ portfolio at risk (PAR) stood at 11 percent from 2.5 percent a year back, reflecting the impact on the borrower segment due to the economic challenges faced last fiscal.

While NBFC-MFIs are better prepared to deal with the situation - because of their experience with the lockdowns of last fiscal, and by weathering other storms of the past - their ability to manage asset quality and maintain healthy collections needs to be watched. The fact that many of the larger MFIs have strengthened their capitalisation over time and are also maintaining higher liquidity levels will help support their efforts to manage the situation.

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