Improving collection efficiency and growth pick-up in the Second half of fiscal 2021 is expected to help the Microfinance institution's long-term prospects, rating agency ICRA said on Thursday. However, incremental covid-19 related disruptions remain a concern.

ICRA in its statement said, "The overall long-term growth outlook for the domestic microfinance industry, including microfinance institutions and micro finance-focused small finance banks (SFB)s, remains robust, even though the near-term outlook is clouded given the Covid-19 induced disruptions," "The onset of lockdown restriction and the moratorium on loan repayments extended to borrowers had led to the industry recording negligible collections in April 2020, but the situation improved gradually over the subsequent months with easing of restrictions and pick-up in economic activity." As a result, the agency pointed that collection efficiency improved to 102 percent in December 2020.

An ICRA's study sample of 20 MFIs indicated that the liquidity flow to the sector has improved over the last few months and overall Rs 22,900 crore were raised in 9MFY21.

It further said that the industry witnessed a reduction in its overall cost of funds during this period, however, despite this; the industry is expected to witness reduction in net interest margins (NIMs), owing to reduced interest income with portfolio growth happening only towards H2FY21 and negative carry because of excess on-book liquidity.

CPI Inflation: March CPI at 5.52 percent, up from February's 5.03 percent

Lockdown Impact on the economy: Lockdown cut off USD 1.25 billion per week: Barclays

International Monitory Fund says Indian economy is on right track