Context:
The Reserve Bank of India (RBI) on Monday reported that stress in the microfinance sector doubled during the April to September period, as bad loans double in H1FY25.
Microfinance
Microfinance provides financial services to individuals and SMEs that lack access to conventional banking facilities, such as microcredit, loans, savings, checking accounts, microinsurance, and payment systems.
Stressed Assets
These are loans that are classified as non-performing assets (NPAs) or special mention accounts (SMAs). Stressed assets include NPAs, restructured loans, and written off assets. They are a strong indicator of the health of the banking sector.
- A bad loan is a loan that a borrower is unlikely to repay. It’s also known as a non-performing loan (NPL).
