Even as Uttar Pradesh Micro-Finance Association (UPMFA) ruled out waiving of loans of some individuals in wake of demonetisation but it admitted that business of the micro-finance companies has come down by 50 per cent in state.
UPMFA Chairman Anup Kumar Singh told reporters here on Friday that due to demometisation move of the Centre the business of the micro financing company in UP has come down by 50 per cent.
“Several people who were given granted loan by the companies too are holding it as there is paucity of cash in the banks. This has adversely affected business and the need of the hour is to take corrective steps as early as possible,” he said.
Uttar Pradesh Micro Finance Association is an umbrella organisation of 18 government and other micro financing agencies in the state.
The chairman contradicted the rumour about waiving of loans of the individuals in wake of the demonetisation move. “There is no word on waiving of the loans of the individuals or the companies by the Centre. Instead, the Centre has only given us direction to give some relaxation like not imposing penalty on non payment of loan installments for two next months,” said Singh.
He said though the consumer would get some relaxation if they default in payment of the installments but their index in the credit bureau would get downgraded and it can affect their future proposals for loans.
The Association members also hinted that the political leaders are responsible for circulating the rumours about the waiver of the loans and even some of them are sending clients to the respective banks to enquire on this matter.
Over the last year, various micro-finance institutions in UP have disbursed loans to the tune of about Rs. 8,000 Crore benefiting over 39 lakh borrowers. However, post Demonetisation, the micro finance sector is facing unprecedented challenges in collecting repayment from of clients, they claimed.
The situation is getting even more complex with the new Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances, which is creating confusion amongst the clients, other members of the Association claimed.