Banks lost a notable market share in small loans to microfinance companies last year. Small finance and commercial banks accounted for nearly 55.5% of the market in December 2020 while in December 2021; it is down to 58.5% of the market.
The loss is picked by non-banking financial companies-micro finance institutions (NBFC-MFIs), they have raised their share from 29.8% to 33.4%. This market share loss occurred before the RBI liberalized lending restrictions for this sector, removing the interest rate cap. The new laws should make NBFC-MFIs more competitive and help them gain market share.
Credit bureau CRIF High Mark Credit Information Services publishes Microland a quarterly report on microfinance lending. According to the Microland research, banks and NBFCs-MFIs account for 88.5 % of micro lending, with other leaders advancing 11.5 percent of loans. Due to the NBFC issue, bank shares have risen while NBFC-MFI shares have recovered some of their lost territories.
Through 1.5 crore loans, NBFC-MFI loan originations totaled Rs 57,600 crore. The average balance per account increased by 4% on a quarterly basis.