Micro-finance institutions (MFIs) are all set to finally get some respite, with banks adopting a consortium-based approach for lending to MFIs and the Reserve Bank of India (RBI) allowing banks to restructure MFI loans. ?The restructuring of accounts will give some MFIs the needed liquidity,” said a senior SBI official.
MFIs require an emergency funding of an estimated Rs 2,000 crore, of which for-profit MFIs require Rs1,200 crore and not-for-profit MFIs need around Rs 800 crore. Moreover, loans to the tune of Rs 1,500 crore will need to be restructured by the banking industry. RBI had granted a one-time waiver to banks for restructuring MFI loans. Accordingly, these unsecured loans, restructured before March 2011, would be treated as standard assets.
Meanwhile, MFIs? operations in Andhra Pradesh are still hampered and it would take sometime before the provisions of the Microfinance Bill are fully implemented. ?We have received loan applications from borrowers in AP but are awaiting government approval. Collections in AP are picking up but in non-AP states collections are normal,” said MR Rao, MD and CEO of SKS Microfinance.
Some MFIs have expressed fears that the proposed consortium-based lending by banks could slow down the process of approvals and disbursements. ?At the first meeting, banks assessed our cash flows and gauged our fund requirements. We also expressed our views on the new approach requesting them that it should not result in red tapism.? Rao added.
A consortium of banks, lead by Small Industries Development Bank of India and ICICI Bank, has met microfinance institutions to work out the modalities of consortium-based lending model. ?Banks met senior managements of SKS Microfinance, ShareMicrofin, Spandhana and Basix to assess how liabilities could be restructured,” said a senior official present at the meeting.
