Microfinance is turning into a double-edged sword as borrowers carrying multiple loans build up an estimated Rs 15,800 crore in debt. With repayments getting harder, these highly leveraged individuals often become ineligible for additional credit, tightening their cash flow and raising the odds of defaults across the microfinance sector.
Indian bank credit growth is expected to ease to below 12 percent in the coming fiscal year as the West Asia conflict and shifting interest rate dynamics weigh on borrowing and repayment capacity. Icra cautions that small businesses and unsecured loan segments could see more defaults, prompting banks to tighten underwriting for vulnerable sectors.
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