Janalakshmi Financial Services to start small finance bank in Q2

The Bengaluru-based NBFC will open 300 branches during the year covering major locations in India

Micro finance institution Janalakshmi Financial Services (JFS) will start operations of a small finance bank (SFB) in the second quarter of current financial year. It will open 300 bank branches during the year covering major locations in India.

The Reserve Bank of India (RBI) has granted the company a final licence to set up Small Finance Bank, JFS said in a statement on Saturday.

RBI had given the company an in-principle approval in September 2015 to float an SFB within 18 months, subject to its meeting regulatory norms.

  

Janalakshmi is the largest NBFC-MFI in India with a loan portfolio of Rs 12,253 crore and a diversified presence across 284 districts in 19 states as on January 31, 2017, according to rating agency Crisil.

Early this month, Crisil had revised the outlook on company’s non-convertible debentures (NCDs) to “negative” from “stable”. It, however, reaffirmed the rating at “A” for debentures.

The outlook revision factors in deterioration in asset quality, due to weakness in Janalakshmi's collection performance even five months after demonetisation.

In the immediate aftermath of demonetisation, Janalakshmi's average collection efficiency declined to below 80 per cent during November 2016 from 98 per cent in September 2016, and was in line with industry trends. Subsequently, collection efficiency dropped to 77 per cent in December 2016 and January 2017 and the decline continued in February 2017.

The modest collection performance was initially attributable to a combination of cash crunch following demonetisation and local level socio-political issues.