Bhartiya Samruddhi Finance fears default, seeks RBI lifeline

MUMBAI: Bhartiya Samruddhi Finance, the second biggest micro lender for the poor, is headed to the central bank to have its loans restructured to avoid a possible default as attempts to raise equity failed and loan recoveries reduced to a trickle, said two people familiar with the plans.

The micro lender promoted by Vijay Mahaja that held out in the hope of private equity funding when the whole industry rolled over its loans and cut interest rates, is seeking a prolonged tenor and lower rates for its loans, those people said.

"BSFL has approached the Reserve Bank of India seeking its approval to file for corporate debt restructuring,'' said one of the persons who knows the matter." The CDR cell has not received any formal application, but it is in talks with its lenders and exploring the option.''

There is no certainty that the restructuring will be permitted, or what the outcome of the efforts would be. "BSFL is in advanced stage of discussion both with the investors and lenders and expects to have a resolution soon,'' said Manmath Dalai, chief executive at Bhartiya Samruddhi.

BSFL, which was less affected than leader SKS Microfinance or other lenders after the Andhra Pradesh government restricted practices of microfinance companies led to a collapse of recoveries, was negotiating with many funds for equity. But the efforts seem to have failed with no light at the end of tunnel for the entire industry that has crumbled like a pack of cards.

"The institution has not been able to raise funds from its investors which one of the precondition set by banks to release any fresh funding to the MFI,'' the person said.

ICICI Bank, Axis Bank, HDFC Bank, SIDBI, IDBI Bank, Standard Chartered Bank, Citibank are major lenders to the MFI with an exposure of around Rs 1,440 crore.

The MFI has been in discussions with banks to secure a fresh line of credit. However, banks had laid a condition that existing investors such as IFC, Washington, Shorebank, Chicago, Hivos-Triodos Fund, Netherlands, ICICI Bank and HDFC must bring in equity.