Private sector lender RBL Bank has acquired 9.99 per cent stake in Utkarsh Microfinance in a bid to reach out to consumers in the unbanked area. Apart from the stake, RBL has also entered into a memorandum of understanding to extend its product portfolio to Utkarsh customers.
RBL said it has already got all the necessary approvals for investment into the microfinance institution. Utkarsh is one of the 10 players that were granted an in-principle approval last year for a small finance bank (SFB), of the 72 players who had applied. “It will help us extend our distribution footprint and strengthen our financial inclusion initiatives across the rural hinterland. We will strive to explore joint business opportunities that are beneficial to Utkarsh and RBL Bank and to our customers,” said Vishwavir Ahuja, managing director and chief executive officer (MD & CEO), RBL Bank.
On the other hand, with a tie-up with the bank, Utkarsh will be able to expand its range of products and services. “The long-term partnership with RBL Bank will help us augment our bouquet of products and services, including ancillary services. We hope to greatly benefit from RBL Bank’s domain knowledge of the banking and financial sector,” said Govind Singh, MD & CEO, Utkarsh Micro Finance.
These SFBs have been allowed to engage in basic banking activities such as accepting deposits and lending to the un-served and under-served. Their loan size and investment limit exposure to single and group obligators cannot be more than 10 per cent and 15 per cent of their capital, respectively. Also, at least 50 per cent of their loan portfolio has to include loans of up to Rs 25 lakh.
Of the 10 players that were granted in-principle approval for SFBs, eight of them are microfinance players. In fact, private sector lenders are increasingly getting interested in the microfinance space and RBL has become the third lender to acquire stake in a microfinance firm in the past few months. Apart from RBL, IDFC Bank and Kotak Mahindra Bank have also invested in microfinance firms in an attempt to expand their reach into the hinterland. This interest of private banks in the microfinance segment comes at a time when the microfinance industry is expected to have grown at 60 per cent last financial year to Rs 63,853 crore in 2015-16, according to Sa-Dhan’s Bharat Microfinance Report, 2016.
Recently, RBL came out with its IPO and raised Rs 1,211 crore. After that, the bank also raised Rs 330 crore from CDC Group Plc, a UK-based development finance institution.
