Two suicides in recent months after banks refused to restructure .
Non-banking finance companies face renewed asset quality and liquidity risks amid a second wave of COVID-19, Fitch Ratings said on Thursday. These challenges are likely to increase if recent restrictions to contain the pandemic are expanded or prolonged, leading to greater economic and operational disruption, it added. The rating agency further said that an increase in the rate of infections and broadening of social distancing restrictions pose downside risks to its 12.8 per cent growth projection for the current fiscal.
India's equity markets are on a roller-coaster ride, after delivering spectacular returns for two consecutive years - in 2020 and 2021. The benchmark National Stock Exchange's (NSE's) Nifty50 is down 1.5 per cent in the first nine months of the current calendar year 2022 (CY22) as foreign portfolio investors sold Indian stocks due to rising bond yields in the US and across global markets, including India. The sell-off in the Indian equity markets has, however, not been broad-based and largely limited to sectors facing earnings headwinds from rising interest rates, lower commodity and energy prices, and likely economic recession in advanced economies.
One thing is for sure: It smacks of the regulator's lack of confidence in the bank's board, points out Tamal Bandyopadhyay.
The board has decided to expand into all financial services for the rural population. SKS would, however, continue to be a strong player in the microfinance business. Financial inclusion would continue to be in the centre of our activities.
Terming whistleblower allegations on loan evergreening as "grossly inaccurate and baseless", Indusind Bank on Saturday admitted to have disbursed 84,000 loans without customer consent in May owing to a "technical glitch". Lending without the consent was reported by the field staff in two days, and the glitch was also rectified expeditiously, the private sector lender said in a clarification. On Friday, there was a media report about anonymous whistleblowers writing to the bank management and the RBI about BFIL, the microlending-focused subsidiary of the bank, allegedly resorting to evergreening of loans, wherein existing borrowers unable to pay dues were given new loans to present the books as clean.
India Inc resorted to salary cuts to protect their profits in the June quarter, as revenues came under pressure due to the second pandemic wave that affected nearly the entire country, a report said on Wednesday. The "weak" wage growth will prove to be a drag on the overall economic recovery in the medium term as it will affect household consumption, the report by India Ratings and Research said. An environment of pandemic-led uncertainty and elevated inflation could impact the level of spending and hence the overall demand, it said.
Bandhan Financial Services, the first microfinance institution in the country to win a bank licence, is also one of the youngest entities to be allowed to enter the banking space.
The Manila-based development finance institution has decided not to guarantee loans directed to Andhra Pradesh, where the microfinance activity has fallen sharply due to strict rules introduced by the state government in October last year.
The Bill - to centrally regulate microfinance institutions (MFIs) - may also cap the rates charged by these institutions or limit margins, that is, the difference between the rate charged from the borrower and the lender's cost of funds.
One of the main criticisms of microfinance institutions one hears is that they charge high interest rates. One reason for this perception is the reference to interest rates as a percentage of the loan amount.
This September, Sachin Bansal picked 94 per cent stake in microfinance company Chaitanya Rural Intermediation Development Services. His immediate plan is to scale up the company's operations as quickly as possible without making much investment in physical infrastructure and by leveraging technology.
The business model of the microfinance sector must change, emphasised C Rangarajan, chairman of the Economic Advisory Council to the Prime Minister, saying that the microfinance movement must have as its ultimate goal the desire to help the poor and enable them to come out of poverty.
Sure, a few listings like those of SKS Microfinance and Gujarat Pipavav have seen significant investor interest, but experts say it's too early to signal a primary market revival.
As the chairperson of SKS Trust, the largest shareholder in SKS Microfinance, Biksham Gujja created a stir by announcing they wanted to nominate Vikram Akula, the ousted boss who had founded the company the latter founded, as its representative on the board.
These banks are finding it hard to pick up seasoned bankers at the pay they are offering
For smaller MFIs, resuming operations is more difficult because they haven't got any fresh bank credit sanctioned from their lenders.
Even today, many MFIs already distribute pension and micro insurance products to low-income households.
SKS Microfinance, one of the country's leading microfinance companies, has extended life insurance cover to about one million poor women in India in states such as Andhra Pradesh, Orissa, Karnataka, West Bengal, Rajasthan, Uttar Pradesh and Madhya Pradesh.
A well-run non-banking company has better margins than a bank, but the objective of setting up Ujjivan was to provide comprehensive financial inclusion, Ujjivan Small Finance Bank MD & CEO Samit Ghosh tells Anup Roy in an interview.
One of the factors behind the rise in securitisation deals was State Bank of India's (SBI) decision to buy portfolio worth Rs 45,000 crore from NBFCs
In absolute terms, close to 9.2 million customers (almost equal to Mumbai's suburban population) have defaulted on loan repayment. Microfinance institutions currently have around 32 million clients in the country.
With over Rs 15,000 crore in deposits, its strategy is a hit for now, but the real test will come when it starts lending to retail and corporate customers in a big way
The Nifty Bank index has come off 15 per cent from its peak in February, underperforming the benchmark Nifty which is down 6%.
Industry experts estimate that demand for loans from the sector outstrips supply by more than $80 billion.
MUDRA bank will help microfinancing firms to lend more.
The US-born microfinance guru, who still speaks with a twang, runs one of the country's largest microfinance companies, SKS Microfinance.
It might be difficult to repeat the SKS success with VAYA Finserv, say analysts
The strict curbs, including a curfew from 8 pm till 7 am, and prohibitory orders during the daytime on weekdays came into force from Monday in the state.
Clad in his trademark kurta pyjama Vikram Akula has never been at a loss for words while articulating to the media the pivotal role that micro-lending can play to liberate the rural poor from the clutches of money lenders. It earned him the status of poster boy for the microfinance industry.
A host of companies started the ground work for their banking play.
Nine advisory committees to suggest sector-wise solutions.
Some banks, including ICICI, want to restructure securitised advances along with other loans. This is being opposed by Axis Bank, IndusInd Bank and YES Bank.
A vast majority of borrowers are in the essential services' supply chain with tiny and micro businesses, and this has sprung back.
Stung by the controversy over the sudden sacking of the Managing Director at India's largest microfinance institution, SKS Microfinance, lenders have decided to raise corporate governance issues at board meetings of other MFIs.
The sector is in turmoil since the Andhra Pradesh government introduced new legislation to regulate it. The state accounts for a third of MFIs' lending.
Two months before the microfinance sector crisis in October, an internal committee of the Reserve Bank of India (RBI) had warned of possible problems in the sector.
The sub-committee, headed by Y H Malegam, is to make recommendations relating to regulation of microfinance activities of NBFCs, especially with regard to issues impinging on borrowers' interests.
A rural women's university is pioneering an effort to teach microfinance through practical lessons in the villages of Sonepat.
New Assam Chief Minister Himanta Biswa Sarma Monday said controlling the 'alarming' COVID-19 situation in the state is his first priority and his aim will be to make the state one of the top five in the country in the next five years.
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