 "MFI sector can cover Bandhan gap of Rs 10k cr: Ratna Vishwanathan")
What is your outlook for the sector?
The current size of the MFI industry is Rs 40,000 crore. The industry is going through a lot of changes, as a lot of new entities are coming up, offering different financial products. Having said that the overall outlook for the MFI industry is positive. Of course, one has to take into account that one of our largest MFIs, Bandhan is moving out and becoming a bank. This means that the overall gross loan portfolio of the MFI industry will come down by nearly Rs 10,000 crore. However, at the same time, there is a lot of investment pouring in to the sector. This apart, the RBI has raised MFI lending limits from Rs 50,000 to Rs 1 lakh. Thus, there is a likelihood that more money will flow into the sector. In the last financial year, we grew at 61 per cent. We expect a moderate rate of growth this year, because a very high rate of growth is detrimental.
As Bandhan moves out, what would be the expected size of the MFI industry by next year?
There are predictions that we could go up to Rs 60,000-70,000 crore. However, this depends on the absorptive capacity of the sector. However, we will be able to cover the gap of Rs 10,000 crore, which Bandhan is going to create, by increasing the lending portfolio. At the same time, we should be careful that things are done equitably. We should not push the products that customer does not want.
Many MFIs have applied for a small bank licence. If some of them get the licence, what will be its impact on the sector?
Of nearly 45 members, nearly 17 MFIs have applied for a small bank licence. Though not all will get a licence, we expect a sizable numbers to get it. However, this should take a year at least, because we expect the announcement to come by August-end. We will have to wait and watch. We can’t predict how much money will go out of the sector. However, we would look it in positive perspective. We will have yet new entities to fund the MFIs. Thus, in the interest of easy access of fund, this is a positive development. Moreover, there is a huge credit demand between Rs 1 lakh and Rs 10 lakh. The small finance bank will serve the small enterprises. Moreover, they will not do much of non-secured lending, whereas the MFIs do only to non-secure lending.
Over the last few years, RBI has accepted many of MFIN's demands, including the latest move to increase loan size. What further actions do you expect from the RBI in the interest of the MFI sector?
There are a few micro regulations we are looking at in terms of small savings account under Jan Dhan Yojna. It lays certain conditions on how much money one can transact and keep in the account, which is not helpful to the MFI client. The fact that you can withdraw only Rs 10,000 in a month doesn’t really help an MFI client, who take loans of Rs 13,000-14,000. In addition, at any given time, one cannot have a balance of more than Rs 50,000 in your bank account. During the entire year, the total transaction value in the account cannot be more than Rs 1 lakh. We demand that once the clients comply with the KYC norms, they should be allowed to use their bank account as any other account.
Can you throw some light on the bank and private equity (PE) funding scenarios in the MFI industry?
PE investment is growing, especially with those MFIs that have a diversified portfolio. Bank funding is also growing. Last financial year, we got 78 per cent of out total funding from banks. In 2013-14, bank funding was close to 27,000 crore against Rs 15,000 crore.