BASIX undecided on changing to a small bank, says CEO

RBI norms propose area of operations of small banks to be restricted to contiguous districts in a homogeneous cluster of states

BASIX Group is undecided on converting its microfinance business into a small bank, due to proposed restriction in scope of activities of such banks.

“Right now, the final guidelines have not come. The current guidelines talk about contiguous districts and homogeneous cluster of states. We are already in three states – Andhra Pradesh, Telangana and Karnataka...It is not only us. All microfinance institutions that are in more than one state will not find it attractive to become a small bank if this regulation is there (in the final guidelines),” Vijay Mahajan, founder and chief executive officer of BASIX Group, said.

He also said BASIX, which opted for corporate debt restructuring following the crisis in Andhra Pradesh's microfinance sector, has started repaying its bank loans from earlier this year. “The Andhra Pradesh government has caused a loss of Rs 700 crore to us and Rs 7,200 crore to the whole banking system. It (the crisis) requires resolution, not in a normal way but at the policy level...We have started repaying (bank loans) from April onwards,” Mahajan said.

BASIX had lent close to Rs 1,250 crore of micro-loans outside Andhra Pradesh. The company has recovered Rs 1,100 crore out of that to repay its bank loans. “The biggest problem is due to wrong decision of Andhra Pradesh government the poor of Bihar, Odisha and Assam is not getting microfinance,” Mahajan said.