Muthoot Microfin to open up to 30 branches in Telangana and AP this quarter: CEO

Micro-finance institutions are those that borrow from banks and lend to small borrowers at a margin.

Microfinance company Muthoot Microfin is planning to open a total of 20-30 branches in Andhra Pradesh and Telangana before the end of financial year (FY) 2023-24, said Sadaf Sayeed, Chief Executive Officer( CEO). Currently, the company doesn’t have a branch in these two states.

“We would be opening branches both in Andhra Pradesh and Telangana. We would be starting with four branches in each state, and are looking at opening 20-30 branches in this quarter,” Sayeed said to Moneycontrol on February 1.

The company reported a year-on-year drop in disbursements to Rs 2,521crore in the October-December quarter of FY23-24, from Rs 2,700 crore in the corresponding quarter the year prior. "We reduced our disbursements in Tamil Nadu because of the floods there, due to which there was a decline," Sayeed said.

The company, Sayeed said, is well capitalised and will not need capital infusion in the next two years. "Our capital adequacy ratio is around 29.60 percent. There is no need for any infusion in the next two years," Sayeed said.

Micro-finance institutions are those that borrow from banks and lend to small borrowers at a margin.

On February 14, 2023, the Telangana High Court had ruled that states cannot regulate MFIs registered with the Reserve Bank of India (RBI), as the power to regulate microlenders rests solely with the central bank.

The Telangana High Court ruling came 12 years after the microfinance industry lobby, the MicroFinance Institutions Network (MFIN), filed a case against the money-lending laws enacted by the erstwhile Andhra Pradesh government in 2010 following unhealthy lending and recovery practices by a few companies.

This impacted the business of all MFIs, forcing some well-known names in the state to wind up operations. Till then, MFIs big and small used to be controlled solely by state governments. But, all that changed in July 2012, when RBI announced new regulations for MFIs.

Thereafter, industry experts say that MFIs have weathered multiple crises — like demonetisation and Covid — and emerged stronger, and their near-term outlook remains positive thanks to factors like regulatory clarity, declining credit costs, etc.