5 | Annual Report | 2024-2025 Managing Director’s Address Greetings, I am delighted to connect with all of you through the Annual report FY 2025 of Arohan Financial Services Limited, as we enter the 20th year of our operations having started the microfinance business in April, 2006. As of March 2025, Arohan operates through 1102 branches in 17 states with a workforce of over 10,200 employees serving 2.1 mn end borrowers with a credit portfolio outstanding of over INR 6,000 Cr. In a very difficult year, we have been one of the few entities in the Top 10 NBFC MFIs to report a profit with best-in-class GNPA at 2.85% and an NNPA of just 0.53%. India’s microfinance sector, which plays a vital role in promoting financial inclusion and currently serves nearly 80 mn borrowers, is facing a complex mix of long-standing and emerging challenges. Issues such as KYC verification— particularly the reliance on Voter ID following the 2017 Supreme Court restriction on Aadhaar— have raised concerns around data accuracy and borrower duplication. Inconsistencies in credit bureau data updates, ranging from daily to monthly, affect lending decisions in a sector where real-time information is crucial. High employee attrition post-pandemic, often exceeding 40%, has impacted borrower relationships and portfolio quality. At the borrower level, there’s a shift toward overborrowing, driven by demand for larger loans irrespective of repayment capacity, while some institutions are compounding the risk through irresponsible over-lending with relaxed underwriting and faceless fintech lending. Governance lapses in certain entities—such as inadequate board oversight on growth, pricing, policies and management incentives—have further undermined stakeholder trust. There is also a prevalent misconception about interest rates, where a 24% reducing balance rate is misinterpreted as interest burden of Rs 24 for a loan of Rs 100 for a year when it is actually just Rs 13.47! In the absence of formal credit, the borrowers have to depend on informal lenders charging up to 240% - 10 times the average formal rate. Adding to the strain are external disruptions like inflation, wage Manoj Kumar Narayan Nambiar Managing Director
RkJQdWJsaXNoZXIy NTE5NzY=