Calcutta, Jan. 26: Rating agency Icra has expressed concerns over the deterioration in asset quality of non-bank microfinance institutions in the wake of demonetisation. But, this has increased to around 19 per cent as on December 31, 2016, Icra said. "Over-leveraging among borrowers coupled with the shortage of currency and the impact of demonetisation on borrowers' earnings will adversely impact the asset quality of microfinance institutions," he added. "The pace of replenishment of cash supply in the system, the medium- to long-term impact of demonetisation on borrowers and the quality of customer engagement by the microfinance institutions will be the key determinants of asset quality in the future," the Icra official said. "Also, the extent of credit costs that microfinance institutions have to incur will depend on its share of affected portfolio, capital structure as well as loss-sharing arrangements," he added.

Source: The Telegraph January 26, 2017 17:29 UTC