Comments
Micro-lenders are going back to Reserve Bank of India to seek a review of its latest move to tweak the margin cap.
The industry feels that the new cap will hurt the industry at a time when it is beginning to pick up after the Andhra Pradesh crisis in 2010. The last six months saw banks opening the credit tap for the industry, with at least seven firms getting private funding, including one from IFC, Washington.
The RBI had, earlier this month, modified the margin cap for MFIs from 12 per cent to 10 per cent for large lenders (with loan portfolios of over Rs 100 crore) and 12 per cent for others.
MFIs are seeking at least restoration of the earlier margin cap of flat 12 per cent for all micro-lenders.
“Operating under the modified margin cap norms will be challenging. At least the earlier flat 12 per cent cap should be restored,” Alok Prasad, CEO of Micro Finance Institution Network (MFIN), said.
With revived interest from banks, the industry expects the gross loan portfolio to grow 25 per cent this fiscal. Last year, it had dropped 15 per cent to reach about Rs 15,400 crore — before the 2010 crisis, it had touched a peak of about Rs 26,000 crore.
Sanjay Sinha, MD of Micro-Credit Ratings International Ltd (M CRIL), said it is impossible for MFIs to operate at this band of margin cap, as it included the value of loans lost and returns to investors.
M CRIL estimates that the small micro-lenders will lose at least four per cent on their assets, while the larger ones will lose 1-2 per cent under the modified margin cap regime. “This will further bleed the MFIs,” Sinha pointed out.
Net worth
The industry’s net worth retreated 16 per cent at Rs 6,200 crore last year. This was mostly on account of total write-offs worth Rs 1,779 crore. “Five MFIs, including two large ones in AP, are yet to finalise their write-offs. Hence, the final write-off may be even higher,” an MFIN member said.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.