Microfinance
Operations of microfinance institutions are slowly getting normal with improved cash availability.Reuters

After witnessing a fall in repayments and dip in disbursements, the impact of demonetisation on microfinance institutions is slowly waning with improved business sentiments.

In an interview with CNBC TV18, the chief financial officer of Ujjivan Financial Services, Sudha Suresh, said that things are likely to ease significantly by the end of this month.

"The situation is much better now compared to last week. The scenario is that the customers in terms of their access to the new currency have been able to have a better position," the report quoted Suresh as saying.

With the impact of cash crunch fading, Ujjivan Financial Services -- which got listed in the bourses this fiscal -- has been able to disburse around Rs 553 crore in November and posted a robust collection rate of 91 percent.

"We have posted a robust collection of 91 percent in November and have also been able to disburse almost Rs 553 crore during this month," Suresh said.

She, however, declined to provide any loan growth figure for coming months. "We would like to be cautious in terms of watching the position as it happens in December. In terms of repayments and collections, things are far better now. In terms of new loans growth and disbursement, we would like to see whether we can take on the same trajectory," Suresh added.

In terms of disbursements, the company continues to provide loans to existing customers and is taking a fresh look at new customers.

After the Narendra Modi government's move to ban high value currencies, microfinance institutions have faced problems in repayments from customers along with disbursements. Earlier, a report by rating agency India Ratings said that microfinance institutions across the country were facing an increased risk of over-leveraged borrowers owing to demonetisation.

"MFI borrowers will face cash flow mismatch, thereby re-prioritising their expenses. As a result, MFIs could witness high overdue, indicating lack of diversification in MFIs' borrower profiles," the report had said.