MICROCAPITAL BRIEF: Reserve Bank of India (RBI) Gives 2-Year Extension to Share, Asmitha, Spandana Sphoorty to Meet Capital Requirements

The Reserve Bank of India (RBI) has given three microfinance institutions (MFIs) a two-year extension to meet the requirements to qualify as non-banking financial company (NBFC) MFIs. The MFIs are Share Microfin Limited, a Hyderabad-based MFI that mainly serves women; Asmitha Microfin Limited, a Hyderabad-based MFI that offers loans primarily to women; and Spandana Sphoorty Innovative Financial Services, a Hyderabad-based MFI that provides microcredit and “credit-plus” services.

In order to be classified as an NBFC-MFI, institutions must have at least INR 50 million (USD 853,000) in net owned funds and maintain a capital to risk asset ratio (CRAR) of at least 15-percent. Since 2011, all three MFIs have decreased their debt to banks. During this time, Share and Asmitha have together paid off approximately INR 4 billion (USD 68.3 million) of their loans, leaving INR 26 billion (USD 444 million) still owed. In 2011, Spandana owed INR 42 billion (USD 717 million), and has since reduced that amount to INR 17.5 billion (USD 299 million). SHARE and Asmitha reportedly have long-term plans to merge [1].

As of 2013, Share reported total assets of USD 300 million and 2.1 million active borrowers. As of the same year, Asmitha reported total assets of USD 165 million and 922,000 active borrowers, and Spandana reported total assets of 359 million and approximately 2.32 million active borrowers. None of the institutions accepts deposits.

By Benjamin Krupp, Research Associate

About Share Microfin Limited

Share Microfin Limited is a microfinance institution (MFI) based in Hyderabad, India. After beginning operations in 1989 as a nonprofit, Share was converted into a non-bank financial institution (NBFI) in 2000. It offers loans—primarily to women—as well as training and micro-business consulting. As of 2013, Share reported to the US-based nonprofit Microfinance Information Exchange (MIX) total assets of USD 300 million, a gross loan portfolio of USD 292 million and 2.1 million active borrowers. As of 2012, SHARE reported a return on assets of -46.4 percent and return on equity of -252.75 percent. Share does not accept deposits.

About Asmitha Microfin Limited

Asmitha Microfin Limited is a microfinance institution (MFI) based in Hyderabad, India. It offers collateral-free group and individual loans to women. Registered as a public limited company, Asmitha was founded in 2002 and operates primarily in rural areas. According to the US-based nonprofit Microfinance Information Exchange (MIX) Asmitha reported total assets of USD 165 million, a gross loan portfolio of USD 165 million and 922,000 active borrowers as of 2013. As of 2012, Asmitha reported a return on assets of -51.09 percent and return on equity of -489.76 percent. Asmitha does not accept deposits.

About Spandana Sphoorty Innovative Financial Services

Spandana Sphoorty Innovative Financial Services Limited provides microcredit and “credit-plus” services to low-income households in India. The company was founded by Padmaja Reddy in 1998 and receives its funding from development finance institutions and banks. As of 2013, Spandana reported to the US-based nonprofit Microfinance Information Exchange (MIX) total assets of USD 359 million, a gross loan portfolio of USD 346 million and approximately 2.32 million active borrowers. As of 2012, Spandana reported a return on assets of -46.92 percent and return on equity of -996.06 percent. Spandana does not accept deposits.

About Reserve Bank of India (RBI)

Established in 1935, the Reserve Bank of India (RBI) undertakes consolidated supervision of the financial sector comprising commercial banks, financial institutions and non-banking finance companies (NFBCs). The current focus of RBI is to supervise financial institutions, consolidate accounting standards, resolve legal issues in cases of banking fraud, monitor non-performing assets and supervise the rating model for the banking sector. In 1979, the National Bank for Agriculture and Rural Development (NABARD) was formed at the behest of RBI to provide regulatory oversight to regional rural banks (RRBs) and to promote the development of agricultural lenders: tasks that had been the responsibility of RBI. While non-banking financial companies such as for-profit microfinance institutions operate under RBI regulations, the responsibility for inspecting agricultural lenders, RRBs, state cooperative banks, district central cooperative banks and state cooperative agricultural and rural development banks was transferred to NABARD. RBI maintains these responsibilities for for-profit microfinance institutions (MFIs). Although RBI was originally the parent organization of NABARD and until October 2010 held a 72.5-percent stake in the outfit, RBI owns a 0.5-percent stake in NABARD as of March 31, 2013.

Sources and Additional Resources

[1] Business Standard: Reserve Bank Breather for 3 Microfinance Institutions

[2] Reserve Bank of India, August 22, 2013: Reserve Bank of India Annual Report

MicroCapital, November 3, 2012: Microfinance Institutions (MFIs) Share, Asmitha of India, Again Look to Merge

MicroCapital, November 1, 2012: Indian Microfinance Institutions (MFIs) Spandana Sphoorty Financial, Share Microfin, Asmitha Microfin Call Off Merger After Restructuring plans Approved

MicroCapital Universe Profile: SHARE Microfin Ltd.

MicroCapital Universe Profile: Asmitha Microfin Ltd.

MicroCapital Universe Profile: Spandana Sphoorty Innovative Financial Services

MicroCapital Universe Profile: Reserve Bank of India

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