Four MFIs clinch over Rs 5,000 cr corporate debt restructuring package with banks

In a development that can give a fillip to the crisis-hit microfinance sector, four major microfinance institutions (MFIs) have closed deals for over Rs 5,000 crore CDR (Corporate Debt Restructuring) packages with a consortium of banks.

The deal was finalised at a meeting of MFIs and a consortium of 34 banks held in Mumbai on Thursday.

As per the deal, a seven-year CDR package would now be extended to four MFIs — Spandana Spoorthy Financial Services, the largest MFI in Andhra Pradesh and second largest in the country, Share Microfin, Asmita and Trident Microfin Pvt Ltd.

When contacted, Ms Padmaja Reddy, Managing Director, Spandana, told

Business Line that a Rs 2,000-crore package was finalised for her NBFC. “Of this, Rs 1,000 crore would be in the form of optionally convertible preferential shares by the 34 participating banks,” she said.

The duration of loans is seven years including a one-year moratorium on repayment at 12 per cent interest rate, she added.

“This is very important for the sector as MFIs can now focus on expansion in non-AP regions without much worry,” she said.

Mr Udaia Kumar, Managing Director, Share Microfin, said finalisation of CDR deal would now give a breather to MFIs.

“Banks will also consider further lending to MFIs in future. But, as of now, they are still unwilling to fund operations in AP. The AP MFI Act had finally stopped bank funding to MFIs,” he said.

The size of CDR package granted to Share was Rs 2,100 crore while Asmita got Rs 1,100 crore.

Mr P. Kishore Kumar, MD and CEO, Trident Microfin, said his company got a commitment for Rs 127 crore.

“The actual terms are likely to be finalised in a day or two,” he added.

With this deal, the total number of MFIs which secured CDR package now stands at five, including Future Financials which had signed the deal earlier.

Originally, CDR was intended to be offered to seven AP-based MFIs which were badly hit by the row over alleged excesses by recovery agents and the AP MFI (Regulation of Money lending) Act put in place in October 2010. SKS Micro and Basix had opted out of the package.

In the last eight months, disbursal of fresh loans and collection of old dues had almost come to a halt in the State which accounted for about 30 per cent of the Rs 33,000-crore portfolio of MFIs in the country.