ICICI, Grameen seek RBI nod for NBFC

Prof Muhammad Yunus' winning the Nobel Peace Prize is set to give a leg up to microfinance activities in India. ICICI Bank, which has been the most innovative player in the microfinance segment, has joined hands with the Grameen Foundation USA and ITCOT Consulting to set up Grameen Capital India (GCI).

It has already moved the Reserve Bank of India (RBI) seeking a licence for the non-banking finance company (NBFC).

The Grameen Foundation USA sprang from the Grameen Bank of Bangladesh. It was launched in 1997 by Grameen Bank founder Yunus.

The two are strong strategic partners but independent organisations with separate management, staff, funding sources, and governing boards.

While Grameen Foundation will hold 50.5 per cent equity in GCI, ICICI Bank and ITCOT will have 19 per cent and 30.5 per cent, respectively, in the company. GCI, to be registered as an NBFC with the RBI, will provide financial and advisory assistance to microfinance institutions (MFIs) in the country.

The current foreign direct investment policy allows up to 100 per cent foreign investment in NBFCs. Grameen Foundation's 50.5 per cent stake in GCI will subject it to the minimum capitalisation norm of $0.5 million, to be brought in upfront.

Initially, GCI will provide microfinance portfolio purchase and sell to capital market entities and banks, credit wraps to MFIs to enable them to access mainstream domestic capital and debt markets, quasi-equity in the nature of long-term debt and preferred capital, and financial advisory services to help more MFIs leverage domestic and international debt and capital.

Grameen Foundation has a mission is "to empower the world's poorest people to lift themselves out of poverty with dignity through access to financial services and information."

Grameen Foundation USA now holds 8.1 per cent in Cashpor Financial and Technical Services Pvt Ltd, a company incorporated under the Companies Act, 1957, and engaged in the field of microfinance. Grameen Foundation intends to have a strong presence in India and, hence, the setting up of GCI.

ICICI Bank MD & CEO K V Kamath had last year announced the tie-up with Grameen Foundation USA for setting up GCI. The objective was to work with MFIs to access primary and secondary debt markets and privately place MFI portfolios with banks. GCI will also provide credit enhancements to the portfolios of MFIs to help them access funds from banks.

The bank follows a partnership model, separating an MFI's balance sheet risk from its operational risk and leveraging the core competencies of the bank and the MFI.