Following the fallout in Andhra Pradesh in 2010, through an Ordinance, the business had shrunk to R16,000 crore last year, mainly due to bad loans and poor recovery rates. After a challenging year in 2011, we see the industry slowly moving towards normalisation. With the support from RBI and the ministry of finance, we see an improvement in the business in non-AP states. However, in AP, the business continues to remain zero, Alok Prasad said, talking to media on the sidelines of a seminar on micro-finance and financial empowerment, organised by the Centre for Economic and Social Studies (CESS) and MFIN. He said about seven companies have received private investment in fiscal 2011-12.
In Andhra Pradesh, the logjam still continues. Due to the crisis, the employee base has been reduced by one-third from 60,000 to 37,000. Besides, the branch network of the companies also fell by 35%, said Prasad. MFIN has approached RBI for restoring a cap of 12% on margins for large MFIs. The RBI had recently put a 10% cap on margins for large MFIs with loan portfolio exceeding Rs 100 crore, and 12% for smaller MFIs. Operating under the modified margin cap norms is challenging. At least, the earlier flat 12% cap should be restored, especially with the MFI industry seeing revival, he said.