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Pvt banks, NBFC's new micro finance Players in Dying Field of Vidarbha -Times of India
*Farm activist Kishore Tiwari of Vidarbha Jan Andolan Samiti (VJAS) said such entities have turned to the villages as the lending business has saturated in the urban centres. Locals have been appointed as agents who are helping in arranging fast finance just as the other MFIs. Tiwari demanded that the government must appoint a regulator to control interest rates on micro lending.
NAGPUR: Micro finance institutions (MFIs) like SKS Limited may be in the news for charging excessive interest from the rural borrowers but these are not only ones doing so. Lately even private banks and non-banking finance companies normally having a presence urban areas have entered the business of small lending in the hinterland.
Since around two years, these financial institutions have appointed agents in villages for giving loans in micro finance segment. Albeit they charge relatively lower rates compared to pure MFIs which depend on refinance from other institutions. The banks and NBFCs have their own funds. The companies operating in the region include L&T Finance, Kotak Mahindra Bank, Karur Vysya Bank, say sources in business.
Farm activists are crying foul over the situation saying that their entry would only add to the financial distress of the farmers. However, the companies themselves claim they are better than pure MFIs. "The amount lent ranges from Rs 10,000 to Rs 2 lakh per individual and disbursed to groups of even five, unlike a 10-member self-help group (SHG) formed by the public sector banks. Loans are normally granted for agricultural activities also involving a third party whose guarantee is also. For example, if a group gets loan for dairy farming then the firm that purchases milk from it has to provide guarantee of repayment," said Mahesh Rathi, a micro-finance consultant based in Nagpur.
Rathi who brings business for L&T Finance, Kotak Mahindra Bank, as well as Karur Vysya Bank, said normally interest was 14%, but a couple of points are hiked if the recovery team has to go to the borrowers' place for collecting the money. The pure MFIs charge as high as 24% or more, say sources. These institutions are eyeing a significant share of market. Their move is prompted by lukewarm approach by the nationalised banks towards small lending despite their sizable presence in rural areas.
L&T established its micro finance arm in 2008 and so far has lent to around 80,000 individuals in the region, said a senior official here. "Recovery is also a problem at times as there have been cases of the borrowers even beating up company's representatives," said this source.
Farm activist Kishore Tiwari of Vidarbha Jan Andolan Samiti (VJAS) said such entities have turned to the villages as the lending business has saturated in the urban centres. Locals have been appointed as agents who are helping in arranging fast finance just as the other MFIs. Tiwari demanded that the government must appoint a regulator to control interest rates on micro lending.
He added that several farmers were using money for non-productive purposes and it would eventually lead them into a debt-trap। An official in one of the lending agencies said even as the loans were strictly provided for productive use, the NBFC could not control the borrower if he diverted funds for personal consumption.
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Since around two years, these financial institutions have appointed agents in villages for giving loans in micro finance segment. Albeit they charge relatively lower rates compared to pure MFIs which depend on refinance from other institutions. The banks and NBFCs have their own funds. The companies operating in the region include L&T Finance, Kotak Mahindra Bank, Karur Vysya Bank, say sources in business.
Farm activists are crying foul over the situation saying that their entry would only add to the financial distress of the farmers. However, the companies themselves claim they are better than pure MFIs. "The amount lent ranges from Rs 10,000 to Rs 2 lakh per individual and disbursed to groups of even five, unlike a 10-member self-help group (SHG) formed by the public sector banks. Loans are normally granted for agricultural activities also involving a third party whose guarantee is also. For example, if a group gets loan for dairy farming then the firm that purchases milk from it has to provide guarantee of repayment," said Mahesh Rathi, a micro-finance consultant based in Nagpur.
Rathi who brings business for L&T Finance, Kotak Mahindra Bank, as well as Karur Vysya Bank, said normally interest was 14%, but a couple of points are hiked if the recovery team has to go to the borrowers' place for collecting the money. The pure MFIs charge as high as 24% or more, say sources. These institutions are eyeing a significant share of market. Their move is prompted by lukewarm approach by the nationalised banks towards small lending despite their sizable presence in rural areas.
L&T established its micro finance arm in 2008 and so far has lent to around 80,000 individuals in the region, said a senior official here. "Recovery is also a problem at times as there have been cases of the borrowers even beating up company's representatives," said this source.
Farm activist Kishore Tiwari of Vidarbha Jan Andolan Samiti (VJAS) said such entities have turned to the villages as the lending business has saturated in the urban centres. Locals have been appointed as agents who are helping in arranging fast finance just as the other MFIs. Tiwari demanded that the government must appoint a regulator to control interest rates on micro lending.
He added that several farmers were using money for non-productive purposes and it would eventually lead them into a debt-trap। An official in one of the lending agencies said even as the loans were strictly provided for productive use, the NBFC could not control the borrower if he diverted funds for personal consumption.
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