Indian Overseas Bank set to resume MFI lending

Saikat Das
Moneycontrol.com

Indian Overseas Bank (IOB) is set to resume micro finance lending after it saw good recovery of loans from some top micro finance institutions (MFIs) in April-June quarter. These include SKS Microfinance, the largest MFI and the fourth-largest Kolkata-based Bandhan.

"Though we have not disbursed any fresh loans during the quarter but we will now increase MFI exposure. It seems, all the risk factors have eased. Good amount of loan recoveries also promted us to expand the book," S N Mishra, general manager (corporate lending), IOB, told Moneycontrol.com.

It is learnt that the lender has currently no non-performing assets (NPAs) from the sector, that falls under priority sector status. During the first quarter, it has received a repayment of around Rs 100 crore from SKS Microfinance while Bandhan has repaid around Rs 25 crore.

IOB's total exposure to MFI sector is around Rs 630 crore (June quarter) compared to Rs 650 crore in March quarter. Of the total Rs 630 crore, self help groups accounted for Rs 220 crore and non-banking finance companies (under MFI sector) took loans of Rs 400 crore.

"We will increase focus in microfinance sector. After the Malegam committee recommendation, a lot of doubts are cleared about the sector. Now, there is no harm in giving loans to rated micro finance companies,