Bandhan, the country's fourth-largest microfinance institution (MFI), managed to sell about Rs 400 crore of its portfolio to banks.
The lender had entered into separate deals with IDBI Bank, Axis Bank, Development Credit Bank and HDFC Bank for securitisation of the loans, said Chairman and Managing Director Chandra Shekhar Ghosh.
In a securitisation transaction, an MFI usually sells rated loans to investors, including banks and non-banking financial companies, to help them meet priority sector commitments ahead of the financial year.
With the Andhra Pradesh MFI Act imposing severe restrictions on the industry, only a few of them were able to sell loans to banks this year. The Act had curbed microfinance operations in the state. Such operations account for a third of all such loans in the state, which has the largest concentration of MFIs in the country. The new law had imposed curbs on recovery and fresh disbursements. Subsequently, a Reserve Bank of India-constituted panel under Y H Malegam had suggested restrictions such as capping the MFI lending rate at 24 per cent and loans worth not more than Rs 25,000 crore to a single borrower.
The country's largest micro lender, SKS Microfinance recently entered into securitisation deals worth Rs 610 crore in March to improve its liquidity.
“In today's environment, it is not easy to get a good credit rating from banks. As a result, banks have been selective in picking the portfolios,” said Alok Prasad, chief executive of Microfinance Institutions Network.
Apart from SKS and Bandhan, several smaller MFIs entered into securitisation deals this year. Arohan, an MFI based in the East, had securitised loans worth Rs 7 crore with a private bank. “There is a lot of uncertainty regarding MFIs, but we are witnessing the return of sanity. It will happen slowly,” said Shubhankar Sengupta, managing director, Arohan Microfinance.
