MICROCAPITAL BRIEF: Preferring Sector-Wide Solution, Reserve Bank of India Refuses to Classify Restructured Loans as Performing Assets for Microfinance Institutions BASIX, Sharada's Women's Association for Weaker Section (SWAWS)

The Reserve Bank of India ("RBI"), India's central banking authority, has refused to give a special exemption to commercial banks, that include HDFC Bank, Corporation Bank and Axis Bank, to restructure loans outstanding to microfinance providers BASIX Group and Sharada's Women's Association for Weaker Section (SWAWS) Credit Corporation India Private Limited under a classification other than as non-performing assets [1] [2]. RBI has reportedly expressed that such a “special dispensation is unlikely for one or two firms,” and it would prefer “MFIs and banks to come together…as such concessions can be for the entire sector and not individual firms.” Both BASIX and SWAWS did not participate in a corporate debt restructuring ("CDR") offer from RBI that expired in June 2011 that allowed banks to restructure loans given to MFIs without classifying the assets as “bad loans.” Under the CDR, banks offered concessions such as extended repayment terms, lowered loan rates and a moratorium on the repayments on wholesale loans to microfinance institutions (MFIs). 

BASIX Group's microfinance activities are carried out by two MFIs: Bhartiya Samruddhi Finance Limited (BSFL), a non-banking finance company, and Krishna Bhima Samruddhi Local Area Bank Limited (KBSLAB), a rural bank. According to the Microfinance Information Exchange ("MIX"), BSFL reported total assets of ....

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