Money & Banking

SKS Microfinance to securitise Rs 700 cr non-AP loans

G. Naga Sridhar Hyderabad | Updated on March 07, 2011

The country's only listed microfinance institution, SKS Microfinance Ltd, is in the process of securitising Rs 700 crore of its loan portfolio in States other than Andhra Pradesh.

SKS will be the first MFI to securitise its loan portfolios after the industry was hit by the allegations of excesses by recovery agents. Subsequently, the MFI Regulation Act was enacted in A P last year.

“Out of Rs 700 crore, we have already closed some deals, while other[s] are in pipeline,” Mr Dilli Raj, Chief Financial Officer, SKS Microfinance Ltd, told Business Line, while declining to name any banks.

The objective behind the move was to raise funds and increase the capital-to-risk-weighted-assets ratio, he added.

NON-AP PORTFOLIO

When asked on the possibility of the securitisation in the wake of trouble the industry is facing in recoveries in AP, Mr Raj said: “Outside AP, the business is normal with about 98 per cent. As there is no problem for receivables, there are no problem securitising that portfolio.”

Interestingly, SKS had taken up securitisation when banks had almost stopped funding MFIs in the wake of the trouble in AP, which accounted for over 30 per cent of the Rs 33,000-crore portfolio of MFIs in the country, according to industry estimates.

Before October 2010, banks were actively buying loan portfolios of MFIs, as they can be shown under the mandatory agri-portfolio according to the Reserve Bank of India guidelines.

According to the Malegam committee report, as on March 31, 2010, banks were holding Rs 4,200 crore in the form of securitized paper issued by non-banking finance companies.

SKS Micro's scrip declined 1.6 per cent on the Bombay Stock Exchange to close at Rs 608.05 on Monday.

Published on March 07, 2011

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