The Economic Times - - Commodities Plus - At­madip.Ray @times­group.com

Kolkata: Mi­cro loans are set to be­come cheaper with SKS Mi­cro­fi­nance, the listed lender to poor in­di­vid­u­als, tak­ing the lead among small lenders to cut lend­ing rates. It may re­duce rate by as much as 15 ba­sis points as it pre­pares to pro­tect its turf from the likely emer­gence of small fi­nance banks soon. “A 10-15 ba­sis points rate cut is a cer­tainty. We will do it in a month,” said Dilli Raj, pres­i­dent, SKS Mi­cro­fi­nance. “Keep­ing lend­ing rate low is our pri­mary strat­egy,” he said.

SKS, which caters to about 50 lakh small bor­row­ers and has .₹ 6,177 crore of out­stand­ing loans at the end of De­cem­ber last, is the only MFI to lend at sub-20% rate of 19.75%. With bor­row­ing cost set to fall, other MFIs are ex­pected to lower lend­ing rates by 25-50 ba­sis points in the next three to six months. Bank loans are be­com­ing cheaper as they moved to mar­ginal cost-based pric­ing. MFIs rely on bank loans for on-lend­ing. “The rate trans­mis­sion will take some time. In the next three to six months, we may see 25-50 bps rate cut across the MFI spec­trum,” Raj said, point­ing to in­ter­est rate dif­fer­en­tial of 3-4 per­cent­age points be­tween SKS and other lead­ing MFIs. Vil­lage Fi­nan­cial Ser­vices (VFS) man­ag­ing di­rec­tor & CEO Kuldip Maity said the im­pact of new pric­ing method would be felt strongly af­ter Oc­to­ber when fresh bank fund­ing start com­ing in. “We may then be able to pass on the ben­e­fit of lower cost of funds to our bor­row­ers,” he said. VFS, which ended last fis­cal with .₹ 247 crore loan book com­pared with .₹ 107 crore a year ago, lends at a 23% rate. Mi­cro lend­ing has seen around 60% growth for two suc­ces­sive years with the help of lib­eral fi­nanc­ing from banks.

MFIs’ out­stand­ing bor­row­ings now stands at .₹ 36,439 crore, rep­re­sent­ing an 86% growth, ac­cord­ing to Mi­cro­fi­nance In­sti­tu­tions Net­work (MFIN). In the third quar­ter, mi­cro lenders re­ceived a to­tal of .₹ 9,121 crore debt fund­ing from banks as well as other fi­nan­cial in­sti­tu­tions. MFI loans grew 84% in the third quar­ter to .₹ 42,331 crore, MFIN said. The num­ber of ben­e­fi­cia­ries grew by a third to 2.88 crore with an av­er­age loan size ris­ing to .₹ 17,917 at the end of De­cem­ber from .₹ 14,409 a year ago.

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