Non-banking finance companies (NBFCs) have requested the Reserve Bank to extend the one-time restructuring scheme of MSME advances until March 31, 2022, as these players are unable to revive their businesses.

"Considering the challenging environment for MSMEs and lenders, it will be helpful, if the RBI extends the restructuring scheme till at least March 31, 2022," the Finance Industry Development Council (FIDC) wrote.

NBFCs primarily cater to the funding needs of micro, small and medium enterprises (MSME), including retail and wholesale traders. The industry body also urged the RBI to allow restructuring of certain MSMEs loans that already have got the similar relief under the same scheme during the first wave of COVID-19, but are now facing challenges.

The FIDC has also requested the central bank to provide priority status lending (PSL) classification benefit for bank lending to NBFCs on a permanent basis. Earlier this month, the RBI extended the PSL benefit by six months until September 30, 2021.

The letter said under the on-lending model, only fresh loans granted by NBFCs are allowed PSL benefit and the existing unencumbered pools of eligible PSLs do not qualify for such classification benefit.

The industry body urged the RBI to allow bank refinance against existing unencumbered MSME pool originated by NBFCs.

In a separate letter to MSME minister Nitin Gadkari, the FIDC requested to reinstate guarantee cover under Credit guarantee fund scheme for NBFCs (CGS-II) to 75%, which was recently revised to 50 per cent.

Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) had framed CGS II for providing guarantees in respect of credit facilities extended by eligible NBFCs to micro and small enterprises (MSE) borrowers.

As per the modification in the scheme, NBFCs can charge interest rate up to 18 per cent per annum on the loans under CGTMSE.

The FIDC requested the government not to limit the lending rate as capping the maximum lending rate to 18 per cent would defeat the very purpose of CGTMSE Scheme for NBFCs.

With COVID-19 pandemic and the current state of MSMEs and other small borrowers, the industry body requested to re-launch the Interest Subvention Scheme and extend it to both MSME and retail and wholesale traders.


Federal Bank said on Monday it has entered into a strategic tie-up with UAE-based Mashreq Bank to facilitate money transfers from the UAE. Mashreq is one of the oldest banks and also the only privately-owned bank in that country.

The partnership will support Mashreq’s faster payment product, Quick Remit, which was launched in 2017.

Shalini Warrier, executive director, Federal Bank, said, “With a market share of 17% in personal inward remittances to India, a fully end-to-end automated solution will ensure that customers get the benefit of instant transfers in a safe and secure manner and the Indian diaspora in the UAE will surely benefit from this.”

Mashreq customers can enjoy substantial savings as well as continue to send money instantaneously to India from the convenience of their homes or offices.

Tooran Asif, executive vice president, head of consumer banking at Mashreq Bank, said: “This partnership with Federal Bank comes at an important time, as the growth of the UAE remittance market improves and begins to return to pre-pandemic levels. In particular, this tie-up will help to support our popular Quick Remit service to strengthen our India corridor which has grown significantly over the years – and providing our customers with fast, on-the-go solutions to transfer funds instantly and conveniently to their home country – an imperative in today’s highly digitalized environment.”


Bajaj Finance is all set to join the likes of Paytm and Amazon in the prepaid payment segment with the Reserve Bank of India (RBI) approving the non-bank lender’s foray with perpetual validity. The move is part of Bajaj Finance’s broader strategy to expand its digital offerings. RBI has granted authorization to the Company for issuance and operation of semi-closed Prepaid Payment Instruments with perpetual validity.

About the Prepaid payment instrument:

• A semi-closed PPI is effectively a digital wallet but one through which transactions can flow to merchants and establishments other than the one offering the wallet services.

• The wallet will become a part of Bajaj Pay, which is the company’s bid to provide an integrated platform for all payments solutions.

• Semi-closed System PPIs allow you to make payments to multiple merchants through the platform.

• Cash withdrawal services, however, remain prohibited.


The Reserve Bank of India (RBI) has excluded Lakshmi Vilas Bank (LVB) from the Second Schedule of the RBI Act after it was merged with DBS Bank India Ltd (DBIL) last year. A bank mentioned in the Second Schedule of the Reserve Bank of India Act is known as ‘Scheduled Commercial Bank’.

Why did this happen?

• Last year in November, the government had approved the merger of crisis-ridden Lakshmi Vilas Bank with DBS Bank India. The RBI had also superseded the board of the LVB and appointed T N Manoharan, former non-executive chairman of Canara Bank, as the administrator of the bank for 30 days.

• LVB is the second private sector bank after Yes Bank, which has run into rough weather during this year.

• In March, capital-starved Yes Bank was placed under a moratorium. The government rescued Yes Bank by asking the state-run State Bank of India to infuse Rs 7,250 crore and take a 45 per cent stake in the bank.


Muthoot Microfin is planning to raise Rs 350 crore by selling shares during the current year, to fund business growth. Besides, the microfinance arm of Muthoot Pappachan Group is also looking to raise Rs 100 crore from Tier-II bonds.

"We are looking to garner USD 50 million or about Rs 350 crore equity capital to grow and build balance sheet of the company," Muthoot Microfin Chief Executive Officer Sadaf Sayeed told.

He further said the capital infusion will help the company not only bolster its balance sheet but also expand its reach.

The company is also looking to enter Uttarakhand. He said adding that the company has presence in 17 states and Union territories at present.

During the pandemic-hit period, the company hired over 2,300 employees as it opened as many as 64 new offices across different parts of the country. The company is expecting its asset under management (AUM) to increase to Rs 6,500 crore by March 2022 and further rise to Rs 8,000 crore in the next financial year. The company's AUM rose 6 per cent to Rs 5,227 crore from Rs 4,932 crore at the end of March 2020.

On the delinquency, he said the present wave and the consequent lockdown will have an impact on collection and there may be rise in non-performing assets (NPAs) on a temporary basis.

"Once the situation improves, the business and collection should be back to normal as we had experienced last year," he said.

Capital adequacy ratio of the microfinance institution stood at 26.75 per cent at the end of March 2021.


Microfinance borrowers in both urban and rural areas will be key beneficiaries of FMO’s investment. In the last 12 months, Northern Arc has attracted debt financing from an array of global DFIs and impact investors.

Digital debt platform Northern Arc on Friday said it has received $25-million debt financing from FMO, the Dutch development bank and one of the world’s leading impact investors. This is the fourth transaction in a series of large-scale investments recently made by global development financial institutions and impact investors in Northern Arc.

In the last 12 months, Northern Arc has attracted debt financing from an array of global DFIs and impact investors such as US International Development Finance Corporation, Asian Development Bank and Calvert Impact Capital. The funds raised so far have been instrumental in enabling Northern Arc to provide finance to micro-loan borrowers and SMEs in India. The latest investment from FMO will be utilised for on lending to financial institutions that focus on women borrowers, micro entrepreneurs and SMEs.

Microfinance borrowers in both urban and rural areas will be key beneficiaries of FMO’s investment. The loans will play an important role in providing credit to under-banked households and small businesses. Similarly, high quality NBFCs that lend to micro entrepreneurs and SMEs with emphasis on small ticket sizes will also benefit from the facility.

Bama Balakrishnan, COO, Northern Arc, said, “Defined by an engagement spanning over eight years, Northern Arc and FMO are natural partners in furthering the cause of financial inclusion in India. With a shared philosophy of catering to borrowers hard hit by Covid-19 pandemic, the facility from FMO is timely and would specifically be used for lending to women, micro entrepreneurs and SMEs.”

Huib-Jan de Ruijter, chief investment officer at FMO, said: “Northern Arc acts as catalyst to NBFCs without effective access to capital markets. The new transaction fits into FMO’s ambition to accelerate financial inclusion with a focus towards women-run businesses and (M) SMEs. With this transaction, FMO supports an excellent partner who continues to service its clients during these challenging Covid-19 times.”

Edited by : Gowtham Garapati
(MBA Finance Intern)