The soft lending window of the World Bank, the International Finance Corporation (IFC), Washington, has extended the first-ever rupee subordinated loan of Rs 35 crore to an Indian entity -- Mahindra and Mahindra Financial Services Ltd (MMFSL).
The subordinated loan, which has maturity of five years and six months, is part of a total loan package of Rs 84 crore that IFC is giving. The balance Rs 49 crore is in the nature of senior loan with a maturity of 5.1 years.
The average cost of the total package is 10 per cent. MMFSL has already taken the first tranche of Rs 35 crore of loan at a cost of 10.1 per cent.
Bharat Doshi, executive director, finance and corporate affairs, Mahindra & Mahindra, said as the subordinated loan is a rupee loan there will be no currency risk associated with it.
Rajagopal Raman, investment officer, South Asia department, IFC said that the loan transacted by the IFC was matched by a back-to-back swap arrangement with a bank. Hence the private funding arm of the Word bank will not have face any currency fluctuation risk either.
Ramesh G Iyer, managing director, MMFSL, said : "It is difficult for a non-banking finance company (NBFC) to get a loan with more than three year maturity in India and that is why we had to it get from IFC."
MMFSL, a 96 per cent subsidiary of Mahindra & Mahindra, is also planning to expand its presence in auto finance for other companies to extend its reach. Currently, of its total disbursements, about 10 per cent are towards financing products of other companies.
It is also planning to foray into the insurance sector by distributing the insurance products of insurance players through its vast retail network of 160 outlets.
MMFSL is currently the largest rural finance company in India with an asset base of over Rs 1,300 crore and a customer base of over 1.1 lakh customers.
