Satin Creditcare plans to demerge small and medium finance unit into NBFC

Satin Creditcare, the third-largest microfinance company in India, plans to demerge its small and medium finance vertical into a separate non-banking finance company (NBFC). Recently, it had demerged its housing finance business into a separate NBFC. 

The microfinance institution (MFI) has already applied for a licence for SME lending to the Reserve Bank of India. So far, the firm has raised debt of about Rs 30 billion in FY19. It also entered into an assignment transaction of about Rs 2 billion with the State Bank of India. 

SBI had earlier announced to buy assets worth Rs 450 billion from NBFCs to support fund crisis in the sector. Deviating from the model followed by most MFIs, which is turning into small finance banks, Satin Creditcare has plans to diversify into non-microfinance business through separate subsidiaries in the NBFC space. At present, Satin Creditcare has a loan outstanding of about Rs 62 billion.

The MFI is also planning to spin off its third subsidiary, Taraashna, a business correspondent service provider firm, into a fintech one. Recently, it also started online lending services — Loan Dost. 

“About one month back, we became the first MFI to start fintech in the MFI space — Loan Dost. In future, we may look for a separate NBFC, merging Tarsaashna and Loan Dost, for digital lending,” said H P Singh, chairman, Satin Creditcare.

He added: “We don’t want to be purely a NBFC-MFI.; we want to do differential lending. Our NBFC-MFI status restricts our non-MFI business to 15 per cent of the loan. Hence, we are creating different NBFCs for verticals where we see growth potential, like digital lending, SME and housing finance.” He said the firm aims at a target of having 30-35 per cent of its business from non-MFI lending, from about 2-3 per cent at present.

Currently, the SME lending of the firm is over Rs 1 billion, which it expects to scale up to Rs 1.75 billion by March end.

This year, Satin is looking at about 30 per cent growth in loan book, which stood at about Rs 57 billion at the end of March 2018.