Ratings agency ICRA has cut the credit rating for Janalakshmi Financial Services Ltd (JFSL), from "A+" Positive to "A+" Negative in view of the impact of demonetisation and increasing non-performing assets or failure on overall collections.
In its note, the rating agency attributed the negative outlook to soon-to-be-turned small finance bank Janalakshmi’s collections which have gone down to 78% in January compared to 98% before the demonetisation on September 8, 2016. ICRA noted that repayments due for over 30 days are about 22.6% for January from 1% in pre-monetisation period. Even loans with payments overdue for more than 60 days has risen to 11% as on January 31, it said.
Unless Janalakshmi provides for these non-performing assets (NPAs) from its own funds, it may come under pressure in terms of profitability and capitalisation, ICRA said and cautioned that a large portion of Janalakshmi’s total funding, 32% constitutes NCDs. Lenders to Janalakshmi can exercise their option to call back loans if the situation gets worsen.
Not only Janalakshmi, many major MFIs have come under scrutiny of ICRA and for Satin Creditcare Network Ltd., it is the second time that ICRA had raised similar concerns over poor recollections.
Even SKS Microfinance, renamed Bharat Financial Inclusion Ltd now, is likely to face similar situation, said analysts. SKS remained the No.1 microfinance institution after Bandhan became a bank and its IPO success faced the wrath of AP Microfinance crisis.
Bharat is already facing 4.5% NPAs on its books with more than 8 weeks and RBI is unlikely to accede to their request for extension of the time for NPA categorisation of these loans.
Microfinance Institutions Network (MFIN), the top self-regulatory body of MFIs in India, said the impact was across all the microfinance institutions. Even Portfolio at Risk (PAR) for the last 30-days has increased to 7.52% from less than 1% in the pre-demoneitsation quarter, it said.