Assam microloan waiver likely for defaulting borrowers only

PAR, Assam govt, assam, Himanta Biswa Sarma, Guwahati Development Department, lending, portfolio, bush, debt waiver, Guwahati

Assam is likely to firm up its much touted microloan debt waiver scheme this week while it is looking to minimize the impact on its finances.

The scheme is expected to cover only the delinquent loans, people familiar with the matter said. The size of the state’s microfinance sector is about Rs 10,900 crore, fallen from Rs 12,000 crore seen in 2019. About 32% of this loan remained overdue for more than 30 days. Going by this portfolio at risk ratio, the size of the debt waiver could be Rs 3,500 crore.

If the state takes a portfolio at risk for a longer horizon, then the size of the loan waiver may come down. For example, portfolio at risk for over 90 days (PAR 90) is 11.5%, which translates into Rs 1250 crore.

The state’s committee on microfinance loan waiver, formed after Himanta Biswa Sarma sworn in as chief minister, held its second meeting with lenders on Monday to get granular data on the sector.

“We had a meeting and the discussions were on data. We are mining data as much as possible,” head of the committee Ashok Singhal told ET. Singhal, the minister for Guwahati Development Department, is entrusted with the task.

“On Thursday, Friday and Saturday, we will sit and finalise the whole thing. The exposure in this sector is over Rs 10,000 Crore. Some accounts are making regular repayments,” he said.

Many believe that the promise of loan waiver helped the ruling party win the election for the second time in a row.

The lenders favour the loan waiver to cover every micro borrower in some ways or the other. Otherwise, the borrowers who pay regularly feel victimized. Debt waivers in any case create moral hazards in an economy because borrowers tend to hold back repayment in the future thinking that they can get away without repaying loans, spoiling the credit culture.

But the state may look to minimize the size of the debt waiver, facing rising stress on its finances. Its outstanding debt was at Rs 93000 crore at the end of March 2021, nearly 25% of the state’s gross domestic product. The debt-GSDP ratio is estimated to have deteriorated to 24.7% at the end of FY21 from FY18’s 17.4%.

The government had presented a Rs 1249.50 crore deficit budget for FY21 in the last full budget before the state went to polls in March-April this year.

“At the moment the sector requires an announcement from the government as to what they will waive. Even the borrowers with regular repayment records are holding back payment instalments amid the uncertainty,” a senior microfinance official said.

“The government is like beating around the bush. The officials are asking for hair splitting varieties of data,” the person said.

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