Bandhan Bank, the largest microfinance lender, has seen a significant decline in its collection efficiency after BJP, the ruling party in Assam, and its main opposition congress decided to renounce microloans as their main election target. Assam will elect a new government later this year.
Bandhan Bank’s collection efficiency dropped 78% in the first 16 days of the year from 88% at the end of December. The value-based collection efficiency of the bank for the entire country fell from 92% to 90% over the same period.
The microfinance business in the northeast of the state has been facing repayment problems since November 2019 due to socio-political activism.
Assam contributes approximately 8% to Bandhan’s total advance payment of 80255 crore.
Chandra Shekhar Ghosh, chairman of the bank’s board of directors, said the repayment had suffered after talks about the loan waiver, although he believed it was temporary.
“It would stabilize in the future as borrowers understand the importance of having a good balance of payments and that good creditworthiness will help them obtain future credit,” he said.
The loan repayment culture is shaken every time political parties make populist announcements like a loan waiver.