India's banks create big space for some D-St firms

Kolkata has seen large microfinance companies revise their growth projections upwards, indicating a growing space for them in the market. Muthoot Microfin and Satin Creditcare Network, ranked third and fourth in terms of assets under management, respectively, have both increased their growth projections by around 500 basis points.

The microfinance market is becoming more consolidated in favor of large non-banking financial companies-microfinance institutions (NBFC-MFIs), as smaller lenders, including private banks and small finance banks, are downsizing their microfinance portfolios.

According to Satin Creditcare Network chairman HP Singh, the larger NBFC-MFIs are benefiting from the reduced lending by private banks and small finance banks. This has created a higher demand for microfinance services. However, several smaller NBFC-MFIs have either stopped or scaled down their operations due to the lack of institutional support.

Muthoot Microfin CEO Sadaf Sayeed expects the company to achieve a growth of 20% compared to a previous projection of 12-15%. Similarly, Satin Creditcare Network revised its growth projection to 20-25% from 15-20%. The largest NBFC-MFI, CreditAccess Grameen, is also aiming for a growth range of 20-25%. The resilience of the microfinance sector can be attributed to the improved asset quality over recent quarters, thanks to stricter lending guardrails.

Despite the sector-wide contraction during the fiscal year, with gross portfolio shrinking from Rs 4.43 lakh crore to Rs 3.91 lakh crore, the microfinance industry is showing positive signs. CreditAccess Grameen Managing Director Ganesh Narayanan anticipates maintaining the projected growth range, expecting higher growth in the third and fourth quarters, potentially benefiting from the renewed stability in the market.