Bandhan Bank, the largest microfinance lender, has seen its collection efficiency dipped significantly after BJP, the ruling party in Assam and its principal opposition Congress made micro loan waiver as major poll plank. Assam is set to elect a new government later in the year.
Bandhan Bank’s collection efficiency fell 78% in the first 16 days of the year from 88% at the end of December. The bank’s collection efficiency in value for the entire country dipped to 90% from 92% in the same period.
The microfinance business in the northeastern state has been facing repayment issues since November 2019 due to socio-political activism.
Assam contributes about 8% to Bandhan’s total advances 80255 crore.
The bank’s chief executive Chandra Shekhar Ghosh said repayment took a hit following the loan waiver talks while he expects it to be temporary.
“It would stabilise in the future as borrowers know the importance of a good repayment record and that a good credit score helps in getting future loans,” he said.
Loan repayment culture takes a knock every time political parties make populist announcements such as loan waiver.