A recent press report said that Kolkata-based United Bank of India has just sanctioned Rs. 100-crore loan to Bandhan Financial Services, the country’s fourth-largest microfinance institution (MFI) by assets.
Reports said that it is the largest loan offered to an MFI after banks virtually stopped lending to such firms after an October 2010 ordinance by the Andhra Pradesh government made lending and recoveries extremely cumbersome. UBI Chairman and Managing Director Bhaskar Sen said that the company will extend loans to MFIs that follow Malegam committee recommendations diligently.
The loan offered by UBI to Bandhan is priced at 200 bps over base rate, which is currently at 10.50% a year. The loan is for a three-year term. UBI is also involved in offering home loan, personal loan, business loans, vehicle loans etc.
State Bank of India, the country’s largest bank, has also recently given fresh loans to a couple of smaller firms, according to a bank official.
Adds R Ramachandran, CMD, Andhra Bank: “If some proposal comes to us seeking funding we will examine it on merit.” The fresh lending comes soon after banks restructured an estimated Rs 7,000-crore MFI loans last month. The institutions that went for restructuring include Asmitha Microfin Future Finance Services, Share Microfin, Spandana Sphoorty Financial and Trident Microfin. Basix, India’s oldest MFI did not go in for a debt restructuring and is now facing closure.