MICROCAPITAL BRIEF: Indian Microlenders Seek More Time to Repay Funds On-Lent in Andhra Pradesh, Where Microlender Sees “No Improvement At All”

Wholesale loans covering INR 55 billion (USD 944 million) in Indian microloans reportedly are at risk of becoming classified as “non-performing assets” (NPAs) if microfinance institutions (MFIs) do not begin making payments on the loans before the expiration of a 90-day repayment window that begins on June 30, 2013. If the unsecured loans become classified as NPAs, banks will be forced to make 100-percent provisions against the loans. Currently, the loans are classified as standard assets, which carry a provisioning requirement of 2.75 percent.

The funds are owned to approximately 40 banks by four Indian MFIs, Share Microfin, Asmitha Microfin, Spandana Sphoorty Innovative Financial Services and Trident Microfin. The microlenders are asking the banks to extend their repayment schedules beyond the two-year reprieve they received in 2011. According to Kishore Kumar Puli, the managing director of Trident Microfin, “when we opted for a debt restructuring, we assumed that there will be some improvement in the collection rate [in Andhra Pradesh]. But there has been no improvement at all. We have requested banks [to grant us] a second round of debt restructuring as we are not in a position to start repayment.”

If banks grant the second restructuring, the loans would normally be classified as sub-standard, triggering higher provisioning requirements. However, several unidentified banks that are owed money by the MFIs reportedly have indicated that they would be willing to restructure the loans for a second time if the Reserve Bank of India (RBI) would allow them to treat the restructured loans as standard assets instead of sub-standard assets. RBI granted a similar request as part of the restructuring in 2011.

By Makai McClintock, Research Associate

About Trident Microfin Private Limited
Trident Microfin Private Limited (formerly Annapurna Financial Services Private Limited) is a microfinance institution that was established in 2007 and is headquartered in Hyderabad, Andhra Pradesh, India. The goal of the company is to provide comprehensive financial and business solutions to enterprises and low-income individuals, particularly women and microenterprises, in a socially, economically and environmentally sustainable manner. As of 2011, Trident Microfin reported total assets of USD 31.5 million, a gross loan portfolio of USD 25.3 million, deposits of USD 147 thousand and 161,448 active borrowers. Newer data is not available.

About Asmitha Microfin Limited
Asmitha Microfin Limited is a microfinance institution (MFI) based in Hyderabad, India. It offers collateral-free group and individual loans to women. Registered as a public limited company, Asmitha was founded in 2002 and operates primarily in rural areas. According to the US-based nonprofit Microfinance Information Exchange (MIX) Asmitha has total assets of USD 233 million, a gross loan portfolio of USD 236 million, return on assets (ROA) of -11.9 percent, return on equity (ROE) of -45.7 percent and 1.1 million active borrowers as of March 31, 2012. Asmitha does not accept deposits.

About Spandana Sphoorty Innovative Financial Services Limited
Spandana Sphoorty Innovative Financial Services Limited provides microcredit and “credit-plus” services, such microcredit programs that offer financial and health education programs in addition to credit, to low-income households in India. The company was founded by Padmaja Reddy in 1998 and receives its funding from development finance institutions and banks. As of March 31, 2012, Spandana reported to the US-based nonprofit Microfinance Information Exchange (MIX) a gross loan portfolio of USD 533.8 million, return on assets (ROA) of -10.04 percent, return on equity (ROE) of -34.27 percent and approximately 3.4 million active borrowers. Spandana does not accept deposits.

About Share Microfin Limited
Share Microfin Limited is a microfinance institution (MFI) based in Hyderabad, India. After beginning operations in 1989 as a nonprofit, Share was converted into a non-bank financial institution (NBFI) in 2000. It offers loans—primarily to women—as well as training and micro-business consulting. As of March 31, 2012, Share reported to the US-based nonprofit Microfinance Information Exchange (MIX) a gross loan portfolio of USD 415 million, return on assets of -11.6 percent, return on equity of -42.1 percent and 2.16 million active borrowers. Share does not accept deposits.

Sources and Additional Resources

Business Standard Article, “Rs 5,500 Loans May become NPAs by September-End,” http://www.business-standard.com/article/finance/rs-5-500-cr-loans-may-become-npas-by-september-end-113060300626_1.html

MicroCapital Article, October 18, 2011: “MICROCAPITAL BRIEF: Banks Approve $245m Loan Restructuring for Indian Microfinance Institution Share Microfin,” https://www.microcapital.org/microcapital-brief-banks-approve-245m-loan-r…

MicroCapital Article, August 17, 2011: “MICROCAPITAL BRIEF: Indian Microfinance Institutions (MFIs) Share, Spandana Sphoorty, Asmitha Consider Merger, Continue Debt Restructuring Talks,” https://www.microcapital.org/microcapital-brief-indian-microfinance-institution-bandhan-financial-services-raises-29m-in-equity-from-international-finance-corporation-ifc-arranged-by-intellecap-2/

MicroCapital Article, November 15, 2011: “MICROCAPITAL BRIEF: India’s Microfinance Industry on brink of “Collapse” Due to Credit Freeze in State of Andhra Pradesh,” https://www.microcapital.org/microcapital-brief-indias-microfinance-industry-on-brink-of-collapse-due-to-credit-freeze-in-state-of-andhra-pradesh/

MicroCapital Universe Profile: Trident Microfin Private Limited
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Trident+Microfin+Private+Limited

MicroCapital Universe Profile: Asmitha Microfin Limited
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Asmitha+Microfin+Limited#Description_140_word_limit_

MicroCapital Universe Profile: Spandana Sphoorty Innovative Financial Services Limited
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Spandana+Sphoorty+Financial+Ltd#Spandana_Sphoorty_Innovative_Financial_Services_Limited

MicroCapital Universe Profile: Share Microfin Limited
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Share+Microfin+Limited

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