Key Facts about Micro loans in India

Nov 22, 2022

6 min. Read

Micro Loan

Microfinance in India plays an important role in delivering credit to people at the bottom of the economic pyramid. Owing to its grass-roots level connect, it is able to support income-generating activities and impact livelihoods in both rural and urban geographies. Furthermore, microfinance acts as a potent tool for empowering women who constitute the largest part of its borrower base, according to the Reserve Bank of India’s September 2020 report, Microfinance: Reaching out to the Bottom of the Pyramid.

Microfinance loans are of small amounts, with short tenures, extended without collateral and the frequency of loan repayments is greater than that for traditional commercial loans. These loans are generally taken for income generating activities.

Advantages and Benefits of applying for a Micro finance in India :

Micro-finance loans in India rose by 10 per cent sequentially to Rs 2.53 trillion in January-March 2021 (Q4FY21) from to Rs 2.31 trillion in quarter ended December 2020.

According to the credit information bureau, CRIF data loans with 90-plus day dues rose from 3.8 per cent in December 2020 to 4.4 per cent in March 2021.

The expansion in microfinance book in Q4FY21 came on the back of marginal growth of 1.5 per cent in Q3 and de-growth in Q1 and Q2, FY21. Banks continue to dominate the market share of 42 per cent.

In terms of geographical spread, East, North-East and South India account for 67 per cent of MFIs’ loan portfolio, while the remainder is spread across West, North and Central India. Among the states, Tamil Nadu holds the largest share of microfinance loans, followed by West Bengal and Bihar.

This article is authored by L&T Finance.

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