Bandhan Financial Services, an Indian microfinance institution (MFI), has sold INR 550 crore (USD 112 million) of its agricultural loan portfolio to the Industrial Development Bank of India (IDBI), a public – sector bank; Axis Bank, an Indian financial services company; and Development Credit Bank, an Indian private – sector bank, according to a statement attributed to Banhan managing director Chandra Shekhar Ghosh. Bandhan securitized INR 500 crore (USD 102 million) to IDBI and INR 25 crore (USD 5 million) each to Axis Bank and Development Credit Bank. Bandhan is in the process of securitizing another INR 100 crore (USD 20 million) with unnamed buyers to be completed in 15 days.
Securitizing loans frees capital for MFIs, which can be used to fund new loans without the need to borrow from banks. The process also transfers the risks of lending to the loan buyer. Traditional Indian banks must achieve an agriculture lending target of 18 percent of their 2010 adjusted net credit, so many banks are buying loans to meet this goal as the fiscal year comes to an end in March. According to Mr Ghosh, 30 percent of the securitization proceeds will be spent by March, and the remaining 70 percent will be saved for the first quarter of the next fiscal year.
The 147 Indian MFIs that reported 2010 data to the US-based nonprofit Microfinance Information Exchange (MIX) held an aggregate gross loan portfolio of USD 5.2 billion disbursed to 31.7 million borrowers.
By Charlotte Newman, Research Associate
About Bandhan Financial Services
Bandhan Financial Services Private Limited is a microfinance institution (MFI) based in Kolkata, India, that was founded in 2002. As of 2011, it operates approximately 1,550 branches in 18 states in India. It offers microenterprise loans as well as loans for individuals to pay for health emergencies. As of 2010, Bandhan Financial Services reported to the US-based nonprofit Microfinance Information Exchange (MIX) total assets of USD 614 million, a gross loan portfolio of USD 565 million, approximately 3.2 million borrowers, return on assets (ROA) of 5.32 percent and return on equity (ROE) of 41.1 percent.
About Industrial Development Bank of India
The Industrial Development Bank of India (IDBI) Limited is a public – sector bank based in Mumbai, India. The bank serves its clients in the retail and corporate banking arenas through its network of 720 branches and 1,210 automated teller machines (ATMs). As of June 2010, the bank had net income of approximately USD 1 billion and total assets of approximately USD 38.8 billion.
About Axis Bank
Established in 1994, Axis Bank, known as UTI Bank until April 2007, is a publicly-listed financial services firm based in Mumbai, India. Axis Bank provides personal, corporate and non-resident Indian banking services. As of March 31, 2011, Axis Bank reported total assets worth an equivalent of USD 51.8 billion.
Sources and Additional Resources:
The Economic Times: “Bandhan Financial Services Sells Rs 550 Crore Farm Loan Exposure to 3 Banks,” http://economictimes.indiatimes.com/news/emerging-businesses/sme-sector/bandhan-financial-services-sells-rs-550-crore-farm-loan-exposure-to-3-banks/articleshow/12056312.cms
MicroCapital.org story, January 21, 2012, “MICROCAPITAL BRIEF: State Bank of India to Grow Microfinance Portfolio by 50%, Microfinance Institutions Network Promotes Wholesale Lending to Sector,” https://www.microcapital.org/microcapital-brief-state-bank-of-india-to-grow-microfinance-portfolio-by-50-microfinance-institutions-network-promotes-wholesale-lending-to-sector/
MicroCapital Universe Profile: Bandhan Financial Services
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Bandhan+Financial+Services+Private+Limited
MicroCapital Universe Profile: Industrial Development Bank of India
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=IDBI+Bank
MicroCapital Universe Profile: Axis Bank
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Axis+Bank
Browse the MicroCapital Universe and add your entry to the wiki at https://www.microcapital.org/microfinanceuniverse/
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