Bhartiya Samruddhi Finance (BSFL), the microfinance arm of BASIX Group, has requested banks to convert Rs 400 crore loans into tier-I equity capital that will allow the firm meet the new provisioning and capital adequacy norms for micro-lenders. In addition, the company has also sought permission to defer repayment of around Rs 350 crore debts.
The Reserve Bank of India (RBI) has asked microfinance companies to make 100 per cent provisions on aggregate loan installments overdue for 180 days or more from April 1 2012. In addition, micro-lenders have to maintain a capital adequacy ratio of 15 per cent.
"Banks have given an in-principle approval to our proposal and will refer the case to the Corporate Debt Restructuring (CDR) cell. The flash report will be prepared in a day or two. They will work out the final package soon," a senior official of the microfinance company told Business Standard.
In addition to the proposed debt restructuring, the firm is looking to raise around Rs 100 crore from institutional investors. It is also discussing with lenders for additional debt.
Currently, BSFL has Rs 750 crore loans outstanding with banks. It has disbursed a similar amount in rural areas across India, including Rs 400 crore in Andhra Pradesh.
According to senior officials of the company, BSFL repaid Rs 700 crore loans to banks between April 1, 2011, and December 31, 2011. Hence, it has requested lenders to provide them fresh loans to meet the new regulatory norms.
It has not yet been decided if BASIX will provide corporate guarantee on BSFL's loans as part of the debt restructuring package.
"The fresh funding is required for viability of operations," said an official familiar with the development.
BSFL's capital adequacy ratio has fallen below 15 per cent since the end of November 2011, as the firm has not been able to recover the money it lent in Andhra Pradesh.
Since October 2010, micro-lending activities in Andhra Pradesh have come to a standstill, as the state government introduced a legislation that curbed microfinance activities there and affected loan recoveries. According to sources, besides converting a part of the debt into equity, repayment of the remaining Rs 350 crore loans is likely to be deferred by six or seven years. The revised interest rate on these loans has not yet been decided.