MFIs to get Rs 1k-cr YES Bank loans

Private sector lender, YES Bank, is planning a threefold increase in lending to the microfinance sector.

In January, MFIs had accused YES Bank of “recalling” loans amounting to a few hundred crore, citing the crisis in the sector and the resultant default by MFI borrowers.

However, Rana Kapoor, Managing Director and Chief Executive Officer, YES Bank, on Saturday said the bank never withdrew loans from MFIs, and was planning to disburse as much as Rs 1,000 crore to the sector this year. Last financial year, the bank had disbursed about Rs 300 crore to the sector.

“We never withdrew any loans from MFIs. In fact, now MFI borrowers in Andhra Pradesh want loans from MFIs. They want to repay the old loans and take on fresh ones. We will lend to MFIs across the country, including Andhra Pradesh,” said Kapoor at a press meet here on Saturday.

Recently, the Union finance ministry released the draft Microfinance Institutions (development and regulation) Bill 2011, which will bring all microfinance services under one regulator – the Reserve Bank of India.

This apart, Yes Bank plans to scale up lending for the educational infrastructure sector in the country to about Rs 5,000 crore over the next four years. The bank’s present investment in the sector stands at about Rs 500 crore, said Kapoor.

“Educational infrastructure is a great opportunity and we want it to account for about five per cent of our total loan book by 2015. It currently accounts for less than one per cent of our total exposure,” said Kapoor.

Also, he said, interest rates on savings bank deposits should be deregulated.

“We must deregulate the savings rate to make it attractive enough to bring the savings of the unbanked population into the banking system,” he said.

MORE FARM CREDIT NEEDED: MITRA
West Bengal finance minister Amit Mitra on Saturday said banks in West Bengal would have to increase credit disbursement to the agriculture sector and small and medium enterprises — two areas which the new state government has been focusing on as a part of its Bengal revival strategy.

Recent data suggested that only 40 per cent of the total credit demand in the agriculture sector, and 48 per cent in the micro and small enterprises sector, were met by banks, said Mitra at a branch inauguration of YES Bank here on Saturday.

“I am disappointed about the past, but excited about the future. I am disappointed with the performance of banks in West Bengal, because credit disbursement is low compared to the demand,” said Mitra.

Of the total agricultural loan need of Rs 28,789 crore last financial year, only Rs 11,555 crore was disbursed by banks in West Bengal. In case of loans to micro and small enterprises, of the credit need of Rs 15,000 crore, only Rs 7,236 crore was disbursed last year.

However, while applauding the role of microfinance institutions (MFI) in meeting the credit needs of the poor, Mitra said reforms were needed in the area.

“Multiple lending and over-lending are issues in the sector,” he said. There are about three million MFI borrowers in West Bengal.

Also, there was a need to have an efficient model of business correspondent banking and a road map for further financial inclusion in the state, he said.

Also, credit disbursement to self-help groups in West Bengal had been far below than that in other states, he added.