S. Divyadharshini, Managing Director of Tamil Nadu Corporation for Development of Women Ltd. (TNCDW), has written to the Convenor, State Level Bankers Committee (SLBC)- Tamil Nadu flagging the issue of the increasing trend of self-help groups (SHGs) borrowing from microfinance institutions that levy higher interest rates than banks.
The State government, through TNCDW, has implemented a scheme called “Mahalir Thittam'', under which the SHGs are provided financial support. This is part of the Tamil Nadu State Rural Livelihood Mission (TNSRLM).
Ms. Divyadharshini, in a letter, pointed out that the number of SHGs assisted under the programme had increased to 4.08 lakh in 2021-22 from 2.34 lakh in 2011-12, and banks played a significant role. However, she said as per a quarterly report published by Microfinance Institutions Network (MFIN), the micro credit loan outstanding of Non-Banking Financial Companies-Micro Finance Institutions (NBFC-MFIs) has increased by about 24.7% to ₹1,00,407 crore in 2021-22 from ₹80,549 crore in 2020-21.
During the same period, the micro credit loans outstanding of banks have increased by only 0.7%, as per the letter. It also pointed out Tamil Nadu was the largest State in terms of NBFC-MFIs loan outstanding, with gross loan portfolio at ₹36,806 crore as of March 31, 2022.
Banks have bearable interest rates, flexible repayment terms, no strong arm tactics and pressurising recovery measures. But the major factors that influence the SHGS to tilt towards MFIs are the delay in the processing of the loan applications, inadequate quantum of credit and quality of service (on the part of the banks), the letter said.
It also sought SLBC to issue appropriate directives to the member banks to initiate immediate action and prevent SHGS from seeking loans from MFIs.
