ICICI Bank hopes to sell half micro-finance securitisation portfolio

ICICI Bank the largest private sector bank expects to sell 50 per cent of its micro-finance securitisation portfolio in the secondary market.

Addressing mediapersons, Nachiket Mor, executive director, ICICI Bank Ltd, said they were in advanced stages of discussion with rating agencies for rating of securitisation portfolio and banks for entering into securitisation deals.

He added, "We had securtised the micro-finance portfolio of Rs 20 crore from two micro-finance institutions during the current year"

Mor said, "The securitisation of micro finance has a potential of creating a large secondary market in India for micro-finance receivables are over 300 commercial and co-operative banks have substantial priority sector requirements to fulfill. We have about Rs 350 crore micro-finance portfolio and around Rs 200 crore has been contributed by Tamil Nadu".

He said that the first micro-finance paper was introduced by ICICI Bank and expect other banks to follow leading to the creation of a vibrant secondary market and resulting in sustainable access to lower cost funds for micro-finance institutions.

It has been estimated that the demand for micro-finance in India is nearly about Rs 45,000 crore, and the potential market is estimated to be 400 million poor people and is has reached only about 20 million people.

Mor said, "The hurdles for the low penetration of micro finance has been due to excessive dependence on donor driven-grant funded models which affects the scalability and sustainability. Micro-finance requires large investments with returns in the long-term while MFIs are under-capitalised leading to poor capital adequacy negatively impacting leveraging capability. Therefore there is a need to build models that create direct linkages with the commercial mainstream organisations."