Microfinance institutions (MFIs) can now look for some relief as banks have started restructuring loans extended to them.

As of now, over Rs 9,000 crore of loans are being restructured through the corporate debt recovery packages and on the individual level.

“The process has commenced and is progressing well according to a scheme we suggested to the banks earlier,” Dr K. Ramakrishnan, chief executive of Indian Banks' Association told Business Line .

In a meeting of its member banks recently, the association decided that a group of ten banks would be formed for each MFI.

While the selection of first eight members is based on exposure as on December 31, 2010, the rest are to be selected randomly.

“This will augur well for banks, MFIs and clients. The process is smooth now. We will review if we hear anything from our members,” the association's official said.

The loans being restructured involve major MFIs such as Spandana, Share Microfin, Asmita and Future Financial Services, which were among the six cases referred to for corporate debt restructuring. SKS Microfinance had earlier opted out.

When contacted Ms Padmaja Reddy, Managing Director, Spandana, said: “We have a debt of Rs 2,500 crore. ICICI Bank is our lead bank, and it is arranging for restructuring our loans in consultation with other banks.”

Bharatiya Samurddhi Finance Ltd is likely to opt for restructuring. “At present, we are not participating as there is no hurry. But if banks offer a good deal, we may go for restructuring later,” Mr Sajeev Vishwanathan, chief executive of the company from the Basix Group, said.

SKS had earlier said it would mobilise funds instead of opting for restructuring.

Various other small MFIs too were in talks with bankers for restructuring to get a breather for another 10-12 years to repay loans, according to industry sources.

Banks' exposure to MFIs was at Rs 13,800 crore, besides Rs 4,200 crore in the form of securitised papers, according to the Malegam panel.

Related Topics