Farm-loan waivers, IL&FS crisis hit NBFC
Farm-loan waivers announced by various States, and the liquidity crunch following the IL&FS crisis, have hit the credit growth of Kolkata-based NBFC-MFI, Village Financial Services (VFS).
The MFI, which had initially estimated doubling its loan book to ₹1,500 crore in FY19, has only managed to post 40 per cent growth in credit at ₹1,055 crore.
“We had initially targeted to achieve a loan book of ₹1,500 crore by March 2019, and things were going good. However, repayments got affected after the announcement of the loan waiver in some States such as Madhya Pradesh and Chhattisgarh, thereby impacting the credit growth. Moreover, there was a liquidity crunch following the IL&FS crisis,” Kuldip Maity, MD and CEO, VFS, told BusinessLine.
However, credit growth is expected to be robust this fiscal, as sentiments have improved. VFS is confident of growing its loan book by more than 50 per cent to ₹1,600 crore by March 2020.
The growth would come on the back of its geographical diversification, as well as focus on other products, such as SME and affordable housing loans. The MFI recently established its footprint in the north-eastern State of Meghalaya, thereby expanding its services in 11 States across the country. VFS currently caters to more than 4.71 lakh women borrowers through 238 branches across West Bengal, Tripura, Assam, Bihar, Jharkhand, Odisha, Sikkim, Madhya Pradesh, Uttarakhand, Chhattisgarh and Meghalaya.
“The north-eastern region is still an underserved market, with growing demand for credit and financial services.
“We believe there is tremendous opportunity for the MFI sector, and we aim to explore these to reach as many underbanked people as possible,” he said.
Plans are afoot to venture into three-to-four more States during this fiscal, he added.
With a view to diversifying its product portfolio, VFS had undertaken a pilot for disbursing SME loans to its existing borrowers. Under the pilot, which was conducted across eight of its branches in West Bengal, it has disbursed close to ₹7 crore, with an average ticket size of ₹1 lakh and repayment tenure of two years.
The pilot project is almost complete, and it would now look at scaling it up. This apart, the MFI is also conducting a pilot for small ticket size housing loans, primarily for affordable housing.
“The pilot will go on for around three to four months, and only after we have gained adequate confidence will we venture into it as it is a long-tenure product,” he said.