Banks to restructure debt of MFIs worth Rs 6,400 crore
This will get things moving once again as Rs 6,400 crore worth of loans that were with MFIs. Had this debt restructuring not taken place the entire amount would have reported as non-performing assets.
The debt-restructuring deal had come to a stand-off as banks were demanding personal guarantees, and promoters had objected to it.
A banks also wanted to carry a clause stating that if the promoter fails to fulfill the obligation for any reason, including an unfortunate demise, then it will be transferred on their children and other surviving members of the family.
The deadlock between the parties was only broken at a recent meeting between banks and MFIs.
The central bank, Reserve Bank of India (RBI), had given time till June 6 for freezing on the debt-restructuring plan for the MFI industry.
MFIs had requested fresh loans for their working capital needs, but the banks have refused it.
According to media reports five MFIs - Asmitha Microfin, Future Financial Services, Share Microfin, Spandana Sphoorty Financial and Trident Microfin - have opted for the restructuring so far.
The analysts view this deal as suitable to MFIs, as this will ensure that if the business is not run well, the banks will find it difficult to sell the shares of these MFIs. And had the banks managed to get a personal guarantee, the banks could have sold properties and assets of the promoters to recover their dues.
A leading newspaper quoted an unnamed official from the Corporate Debt Restructuring (CDR) cell to have admitted, that the loans to five micro-finance institutions worth Rs 6,473 crore have been restructured. The repayment period proposed is of six years and this excludes a one-year moratorium. The rate of interest on these restructured loans is 12%.
Now that the MFIs and the banks have reached the understanding, the CDR cell should send a letter of approval to the micro finance companies on Monday, which is the last day set by the RBI for completing negotiations.
OneIndia Money