IFC offers 160-cr lifeline to microfin co Bandhan
KOLKATA: International Finance Corporation, an investment unit of the World Bank , proposes to invest Rs 160 crore in Indias fourthlargest microfinance company, Bandhan Financial Services , in what is seen as a ray of hope for the embattled sector.
The details of the stake purchase would be decided at a board meeting on February 17, according to a senior executive at the company.
This is a big news for us, said Bandhan chairman Chandra Shekhar Ghosh. The news could not have come at a better time as the MFI sector is going through a terrible phase now.
Indias Rs 25,000-crore microfinance sector is under siege after reports of some unsound practices by some of the companies in lending and recovery of loans, which at times has reportedly led to suicides by borrowers.
Andhra Pradesh, the biggest microfinance market in India, has brought in strict laws for the disbursal and sanction of loans. This has led to wilful defaults, and a near-paralysis in loan disbursements. Banks have stopped lending fearing bad loans.
The Reserve Bank of India has formed a panel under chartered accountant YH Malegam to suggest ways to regulate microfinance companies.
The investment would enhance Bandhans networth to Rs 510 crore from Rs 350 crore now. According to IFCs internal report , the investment would increase the MFIs outreach in the 18 states where it operates as well as expand its operations in other states, where access to finance is most scarce.
Small Industries Development Bank of India , or Sidbi a state-run lender, is the sole institutional investor in the Kolkatabased micro lender with a 10.81% stake.
Many micro lenders are on the verge of collapse, from what pr! omised t o be the most profitable industry a few months ago when the biggest of them SKS Microfinance listed on stock exchanges with a peak market valuation of close to $2 billion. It has since halved after ousting chief executive Suresh Gurumani unceremoniously.
This will boost bankers confidence on MFIs too, said United Bank of India chairman and managing director Bhaskar Sen.
Although local banks are still maintaining distances from MFIs, global financiers see opportunities in Indias MFI sector. In the first week of January, Bangalore-based Ujjivan Financial Services has raised Rs 40 crore by selling non-convertible debentures to DWM (Cyprus), a member of the Developing World Markets.
The MFIs based in West Bengal are far better than many others in Andhra Pradesh.
Bengal MFIs offer loans at comparatively cheaper rates and incidences of coercive recovery practices are not rampant here, Kolkata-based Village Financial Services managing director Kuldip Maity said.
The details of the stake purchase would be decided at a board meeting on February 17, according to a senior executive at the company.
This is a big news for us, said Bandhan chairman Chandra Shekhar Ghosh. The news could not have come at a better time as the MFI sector is going through a terrible phase now.
Indias Rs 25,000-crore microfinance sector is under siege after reports of some unsound practices by some of the companies in lending and recovery of loans, which at times has reportedly led to suicides by borrowers.
Andhra Pradesh, the biggest microfinance market in India, has brought in strict laws for the disbursal and sanction of loans. This has led to wilful defaults, and a near-paralysis in loan disbursements. Banks have stopped lending fearing bad loans.
The Reserve Bank of India has formed a panel under chartered accountant YH Malegam to suggest ways to regulate microfinance companies.
The investment would enhance Bandhans networth to Rs 510 crore from Rs 350 crore now. According to IFCs internal report , the investment would increase the MFIs outreach in the 18 states where it operates as well as expand its operations in other states, where access to finance is most scarce.
Small Industries Development Bank of India , or Sidbi a state-run lender, is the sole institutional investor in the Kolkatabased micro lender with a 10.81% stake.
Many micro lenders are on the verge of collapse, from what pr! omised t o be the most profitable industry a few months ago when the biggest of them SKS Microfinance listed on stock exchanges with a peak market valuation of close to $2 billion. It has since halved after ousting chief executive Suresh Gurumani unceremoniously.
This will boost bankers confidence on MFIs too, said United Bank of India chairman and managing director Bhaskar Sen.
Although local banks are still maintaining distances from MFIs, global financiers see opportunities in Indias MFI sector. In the first week of January, Bangalore-based Ujjivan Financial Services has raised Rs 40 crore by selling non-convertible debentures to DWM (Cyprus), a member of the Developing World Markets.
The MFIs based in West Bengal are far better than many others in Andhra Pradesh.
Bengal MFIs offer loans at comparatively cheaper rates and incidences of coercive recovery practices are not rampant here, Kolkata-based Village Financial Services managing director Kuldip Maity said.
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