Svatantra Microfin raises lending rates, others stay put
Svatantra Microfin has raised its lending rate to 21%, after having reduced it to 19.25% some 17 months ago, to protect margins amid pressure on borrowing costs.
Svatantra Microfin, promoted by Ananya Birla, has raised its lending rate to 21%, after having reduced it to 19.25% some 17 months ago, to protect margins amid pressure on borrowing costs. Others including Satin Creditcare Network, Fusion Microfinance and Annapurna Finance are holding their existing lending rates at 21.5%.
Although banks have opened up their purse-strings to microfinance companies compared with a tighter regime a year ago, they have made funds costlier than what they were last October.
Svatantra, with a Rs 1,600 crore portfolio, increased the lending rate for new borrowers to 21% from September, while it is at 19.5% for existing borrowers, Vineet Chattree, director, told ET. Earlier, the rates were in 19.25-20%.
“Our cost of funds has risen 50-60 basis points. We are at a high-growth stage when cost of growth remains high. So, we will maintain 10% margin,” Chattree said.
The Reserve Bank of India has capped the margin at 10% for microfinance companies with a loan portfolio of more than Rs 100 crore. Most NBFC-MFIs keep their interest rate margin at the highest permissible level to maximise profit.
“We intend to go back to the sub-20% level again. We will pass on the benefit whenever we get funds at a lower cost,” Chattree said.
CreditAccess Grameen has kept its lending rates in the 18-21% range, with 60% of the lending at 18-19%.
The RBI’s 110 basis point repo rate reduction since February has not affected the borrowing costs of microfinance companies because banks have not passed on the lower rates to them. The MFI sector has stood firm with no asset-liability mismatch amid a credit crisis for other non-bank lenders.
“The problem for NBFC-MFIs is that our cost of funds has not gone down despite the RBI’s successive repo rate cuts,” said Satin chairman HP Singh.
NBFC-MFIs are the second-largest providers of micro-loans, accounting for a 30.2% share, while the size of Indian microfinance has grown to Rs 1.91 lakh crore as of June end. Banks including Bandhan Bank enjoy a 40.9% share.
Bandhan Bank offers micro-loans at 17.95% a year, making it the lowest among private banks.