'Banks taking longer to clear MFI loan applications'

Witnessing slowdown in business, the microfinance industry has said banks were shying away from advancing loans to them.

“Bank lending for fresh loans has been very selective. The entire process of considering loan applications from microfinance institutions (MFIs) is moving very slowly,” Alok Prasad, chief executive, Microfinance Institutions Network (MFIN), said.

In January, the Reserve Bank of India (RBI) had relaxed the debt restructuring norms for MFIs to enable banks to provide them liquidity support. These norms allowed banks to classify unsecured loans extended to MFIs as good assets, allowing them to restructure MFI loans without much difficulty.

“We had approached RBI for debt restructuring in December last year. We have time till March 31 to approach banks,” Prasad said.

Some major banks like State Bank of India, ICICI and Axis Bank are estimated to have lent over Rs 15,000 crore to MFIs. While ICICI has lent around Rs 2,000 crore, SBI has loaned Rs 1,000 crore. Small Industries Development Bank of India (Sidbi) has an MFI exposure of around Rs 4,000 crore.