Cash-strapped microfinance companies that plan to restructure their debts have requested banks for additional loans of Rs 800-1,000 crore. The micro-lenders also requested banks to consider these loans for restructuring along with their existing debts.
“We have initially asked for about Rs 200 crore from banks. Overall, we would need Rs 700 crore in the next seven years. This would primarily be working capital loans to meet our short-term business needs. We need these funds to sustain our business,” a senior official from Share Microfin, a Hyderabad-based microfinance company, told Business Standard.
Share Microfin's local rival, Spandana Sphoorty Financial, sought term loans of Rs 100 crore from banks. The funds are aimed at redeeming commercial papers that the company issued to banks and financial institutions, including Bank of India, Syndicate Bank and UCO Bank. This loan would also be a part of the total debt that Spandana plans to recast. “We have to repay around Rs 140 crore in commercial papers. Spandana has a surplus of Rs 40 crore from its internal accruals. We have made a presentation to banks to give us Rs 100 crore as working capital loan, which would allow us to honour our commitments on commercial papers,” said Managing Director G Padmaja Reddy.
Senior officials of private sector banks said similar requests have been made by Asmitha Microfin and Trident Microfin, which also plan debt-restructuring programmes. However, doubts remain on whether banks would be willing to provide additional loans. The advances would increase the restructured portfolios of banks. “Banks are very reluctant. The funds from banks are not assured. A decision would be taken next week,” said a senior official of a Hyderabad-based microfinance company.
Almost a third of the loans given by banks to microfinance institutions would be restructured. The corporate debt restructuring cell has admitted loans worth Rs 6,473 crore involving five microfinance companies — Asmitha Microfin, Future Financial Services, Share Microfin, Spandana Sphoorthy Financial and Trident Microfin. Currently, their total debt is estimated at Rs 7,411 crore.
The deadline to finalise the loan-restructuring programme has been extended till June 6. For the restructuring, microfinance institutions and banks both have to agree on the terms and conditions. At least 75 per cent of the banks by exposure, or 60 per cent by guarantee, have to favour the proposals.
It has been proposed that interest on restructured loans be charged at 12 per cent. This would have a moratorium of one year and a repayment tenure of six years.
