What portion of your salary should you spend on loan EMIs?
Most people buy a house or a car by taking a loan from the bank, but do you know what is the maximum portion of your salary that you should spend on EMI? What is the 40 percent EMI rule? What are the disadvantages of spending more on EMIs? Among home loan, personal loan, auto loan and credit card bills, which loan should you eliminate first?
Kolkata: A Bill passed by the Assam assembly to control the microfinance industry in the state has the potential to increase asset-quality challenges for the sector, according to rating agency Crisil.
On top of that, if any loan waiver scheme was announced, it would make matters worse due to the potential impact of the moves on repayment discipline, Crisil said.
In the poll-bound Northeastern state, the assembly has set aside RBI observations and passed a Bill last month to put more controls on the microfinance industry while the Congress party has promised loan waivers if voted to power.
Assam’s microfinance portfolio, including banks and non-banks, was estimated at Rs 12,400 crore as of September 2020.
“Certain provisions in the bill that pose operational hurdles could trigger collection challenges and end up dissuading lenders from seeking incremental business in the state,” Crisil said in a credit alert note.
“The legislation is the latest in a string of events affecting microfinance lenders in Assam: economic stress in the tea plantation industry in October 2019, agitation over Citizenship Amendment Bill, and the Covid-19 pandemic that hit the entire nation,” the agency said.
“In the case of NBFC-MFIs, the 30 plus portfolio at risk for Assam was already high at around 20 per cent as of March 2020. In this milieu, the Bill, along with statements on the loan waiver, can create significant moral hazard,” Crisil Rating senior director Krishnan Sitaraman said.
There was a similar case in December 2019 in a few districts of coastal Karnataka, which ended with MFIs taking a hit in terms of high provisioning/write-offs on loans in those districts, he said.