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High NPAs, joblessness, inflation a worry; Biz Confidence Index at 63.9%: Report


New Delhi, Jan 12: Delinquency rates on rural loans have deteriorated in the two years to June 2021, with the microfinance books showing the maximum stress despite a reduction in loans outstanding, a credit information company said on Wednesday.

The inaugural Rural Business Confidence Index (RBCI) prepared by Crif High Mark in association with industry lobby CII came at 63.9 per cent for October, and the positives included credit expansion, higher budget allocations for rural areas and survey participants having positive or neutral outlooks.

Delinquency by value deteriorated by 0.5 per cent for rural retail credit, 2.8 per cent for microfinance and 0.2 per cent for rural commercial between June 2019 and June 2021, the report said.

The concerns on higher Non Performing Assets (NPAs) emanated even as the overall MFI (Microfinance Industry) loans segment experienced a de-growth by 9 per cent to Rs 1.12 lakh crore at the end of FY21.

Rural areas, which support nearly 60 per cent of the population by some estimates, saw an increase in the average unemployment rate to 7.3 per cent in 2021 from 6.8 per cent in 2019, the report said.

Inflation measured by the consumer price index also surged to 5.9 per cent in the rural areas in FY21 from 4.3 per cent in the year-ago period, the report said.

“In India, two-thirds of the workforce live in rural areas, and the rural economy contributes to almost 46 per cent of our national income. Undoubtedly, it is the backbone of India’s economic progress. The COVID-19 epidemic has brought about a significant structural shift in the country and rural India displayed exemplary resilience during this phase,” the credit information company’s managing director and chief executive Navin Chandani said.

He said the index was developed as a mechanism that can capture the performance of the rural economy and to help support strategic decision making.
The index also involves a survey of the industry lobby’s members including both Micro, Small and Medium Enterprises (MSME), and large businesses which operate in rural areas.

In the latest survey done in September and October, 59 per cent of the respondents said they expect an improvement in order books, 48 per cent were hopeful of an uptick in profits while 54 per cent were hopeful of a pick up in credit delivery.

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