The write-off was a part of a technique to chunk the bullet and be future-ready because the trade expects a turnaround in 1 / 4 or two. The 5 publicly listed non-banking finance companies-microfinance establishments (NBFC-MFIs)—CreditAccess.
Grameen, Fusion Finance, Muthoot Microfin, Satin Creditcare Community and Spandana Sphoorty —cumulatively wrote off dangerous loans price Rs 2,440 crore within the fourth quarter of FY25, in contrast with lower than Rs 300 crore within the year-ago interval. The thought is to start the fiscal yr by shedding the stickiest and ageing non-performing property from the stability sheet. Writing off loans wants full provisioning towards these accounts.
Accelerated write-offs require lenders to boost the provisioning degree and take a bigger hit on the revenue and loss account.
“Whereas challenges stay, the early indicators are encouraging, displaying a transparent reversal,” mentioned HP Singh, chairman of Satin, on a post-earnings analyst name. He famous that at instances, solely disruption can shake corporations out of complacency and drive a metamorphosis. “This completely captures the spirit of FY25 — a yr many in India’s microfinance sector would possibly bear in mind as a testing interval, others as a wake-up name.” Satin was the only listed NBFC-MFI that was worthwhile in all 4 quarters of FY25. Udaya Kumar Hebbar, managing director of CreditAccess Grameen, mentioned on an analyst name, “The rising delinquency development within the microfinance trade, which started in April 2024, peaked in November 2024, subsequently reversing until March 2025. We’re already witnessing a brand new PAR (portfolio in danger) accretion fee largely getting normalised throughout all states, excluding Karnataka.” CreditAccess is the nation’s largest NBFC-MFI.
HEAVY LOAD
Gross non-performing property (NPAs) earlier than the technical write-off hit a file Rs 61,000 crore on the finish of March, up from Rs 38,000 crore a yr previous to that, as debtors defaulted as a result of over-indebtedness.
The sector’s cumulative gross mortgage portfolio contracted by about 7% to Rs 3.81 lakh crore on the finish of the March quarter, from the yr earlier, as lenders slowed disbursement to stop additional mortgage losses.
Lenders write off loans when there isn’t a reasonable prospect of restoration. Accelerated write-offs contribute to elevated credit score prices, impacting the revenue and loss account. Recoveries towards such written-off loans, if any, will get credited to the revenue and loss assertion.
The transfer was pressured by rising buyer overleveraging, crumbling of the joint legal responsibility mannequin, rising employees attrition and disruptions in Karnataka and Tamil Nadu.
As an illustration, Fusion wrote off Rs 917 crore in the course of the fourth quarter alone, practically 40% of the cumulative write-offs by listed NBFC-MFIs. To place this into perspective, it had written off Rs 970 crore (internet of recoveries) up to now 14 years earlier than FY25.
Satin had by no means written off loans earlier than FY25 regardless of compensation disruptions throughout occasions akin to demonetisation and the pandemic.
Spandana, which is now below regulatory scrutiny for alleged misreporting and suppression of fraud, wrote off Rs 1,555 crore over the 4 quarters of FY25. “The MFI trade stood at a crucial juncture, going through formidable challenges,” mentioned Singh of Satin. “Establishments needed to navigate a shifting panorama, shoppers skilled heightened vulnerability and the sector as a complete was compelled to rethink long-held assumptions.” It pressured the sector to pause, replicate and reset, he mentioned. “These disruptions served as a catalyst, driving deep introspection, operational recalibration and a renewed concentrate on fundamentals,” Singh mentioned.