New Delhi: The Enforcement Directorate (ED) is conducting raids at Kerala's Mannapuram Finance in connection with allegations that the non-banking financial company (NBFC) collected funds from the public without the Reserve Bank of India's approval.

The searches on Wednesday are being carried out at the premises of the company's promoter and business.

Mannapuram Finance is a well-known NBFC in India that offers a range of financial services, including gold, microfinance, and housing loans.

The company, which has been in operation for over three decades, has a significant presence in South India.

The ED is yet to officially comment on the ongoing raids. IANS

The Enforcement Directorate (ED) is conducting raids at Kerala's Mannapuram Finance in connection with allegations that the non-banking financial company (NBFC) collected funds from the public without the Reserve Bank of India's approval.

ED raids Mannapuram Finance in Kerala

<span style="color: rgb(53,53,53);background-color: rgb(255,255,255);font-size: 14px;font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, "Helvetica Neue", Arial, "Noto Sans", sans-serif, "Apple Color Emoji", "Segoe UI Emoji", "Segoe UI Symbol", "Noto Color Emoji;">New Delhi: Microfinance in India has a long history. Since the turn of this century, it has been expanding rapidly as a viable financial services business because of the influx of Microfinance NBFCs, growth of the self-help groups (SHG) business by Public Sector Banks, and under the NRLM (National Rural Livelihood Mission).
<span style="color: rgb(53,53,53);background-color: rgb(255,255,255);font-size: 14px;font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, "Helvetica Neue", Arial, "Noto Sans", sans-serif, "Apple Color Emoji", "Segoe UI Emoji", "Segoe UI Symbol", "Noto Color Emoji;">It witnessed the introduction of the Small Finance Banks and major private sector banks playing an increasing role in this segment. The industry has had its ups and downs due to external shocks, but has proven to be resilient. It has evolved into one among the fastest growing and most profitable segments of the lending business, creating a positive impact on the lives of a large number of families served by the financial sector.
<span style="color: rgb(53,53,53);background-color: rgb(255,255,255);font-size: 14px;font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, "Helvetica Neue", Arial, "Noto Sans", sans-serif, "Apple Color Emoji", "Segoe UI Emoji", "Segoe UI Symbol", "Noto Color Emoji;">As on March 2023, the microfinance gross loan portfolio was more than Rs 5 lakh crore serving over 13 crore borrowers, compared with a portfolio of Rs 51,773 crore and approximately 7 crore borrowers in March 2012. The borrower base multiplied by 2X; the portfolio by 10X since 2012. The fast-growing 'Individual Loan' portfolio is not included in these numbers because of the absence of a reliable industry source. Organised microfinance in the country officially dates back to 1974. This was when Ela R. Bhat set up the Self-Employed Women Association (SEWA) in Ahmedabad to provide banking services and individual loans to self-employed poor women of the unorganised sector. SEWA was operating as a cooperative bank. The concept of 'Self-Help Groups' (SHG) was established by Aloysius Prakash Fernandez at MYRADA, in collaboration with Canara Bank, in the 1980s.
<span style="color: rgb(53,53,53);background-color: rgb(255,255,255);font-size: 14px;font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, "Helvetica Neue", Arial, "Noto Sans", sans-serif, "Apple Color Emoji", "Segoe UI Emoji", "Segoe UI Symbol", "Noto Color Emoji;">The loans were given to customer groups instead of individuals. These groups collected savings and distributed loans to their members. This model was widely adopted by Public Sector Banks and NGOs, including SEWA. In 1996, Vijay Mahajan established BASIX in Hyderabad, as an NBFC, to undertake microfinance as a viable business. This largely followed the Grameen Bank's 'Joint Liability System' model, where loans were given to individuals, with the groups held liable. A slew of NBFCs were established in the early 2000s, especially in Andhra Pradesh, which followed this model.
<span style="color: rgb(53,53,53);background-color: rgb(255,255,255);font-size: 14px;font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, "Helvetica Neue", Arial, "Noto Sans", sans-serif, "Apple Color Emoji", "Segoe UI Emoji", "Segoe UI Symbol", "Noto Color Emoji;">Over-exuberance led to an explosive growth of microfinance in Andhra Pradesh, which resulted in the first major crisis, and led to a direct conflict between Andhra-based microfinance institutions and the state government, which was also pursuing a government-led micro-finance programme funded by the World Bank.
<span style="color: rgb(53,53,53);background-color: rgb(255,255,255);font-size: 14px;font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, "Helvetica Neue", Arial, "Noto Sans", sans-serif, "Apple Color Emoji", "Segoe UI Emoji", "Segoe UI Symbol", "Noto Color Emoji;">The reasons behind this crisis were three-fold:
<span style="color: rgb(53,53,53);background-color: rgb(255,255,255);font-size: 14px;font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, "Helvetica Neue", Arial, "Noto Sans", sans-serif, "Apple Color Emoji", "Segoe UI Emoji", "Segoe UI Symbol", "Noto Color Emoji;">-- Over-lending based on inadequate data
<span style="color: rgb(53,53,53);background-color: rgb(255,255,255);font-size: 14px;font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, "Helvetica Neue", Arial, "Noto Sans", sans-serif, "Apple Color Emoji", "Segoe UI Emoji", "Segoe UI Symbol", "Noto Color Emoji;">-- Lack of regulations of the microfinance industry
<span style="color: rgb(53,53,53);background-color: rgb(255,255,255);font-size: 14px;font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, "Helvetica Neue", Arial, "Noto Sans", sans-serif, "Apple Color Emoji", "Segoe UI Emoji", "Segoe UI Symbol", "Noto Color Emoji;">-- Private equity firms pushing the microfinance institutions to follow the spectacular growth of the telecom industry in India.
<span style="color: rgb(53,53,53);background-color: rgb(255,255,255);font-size: 14px;font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, "Helvetica Neue", Arial, "Noto Sans", sans-serif, "Apple Color Emoji", "Segoe UI Emoji", "Segoe UI Symbol", "Noto Color Emoji;">This followed a period of regulated growth of the microfinance sector. The first to take the leap was the largest microfinance lender, Bandhan. They began their journey as an NGO in 2001, became a NBFC in 2009, and converted into a universal bank in 2015.
<span style="color: rgb(53,53,53);background-color: rgb(255,255,255);font-size: 14px;font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, "Helvetica Neue", Arial, "Noto Sans", sans-serif, "Apple Color Emoji", "Segoe UI Emoji", "Segoe UI Symbol", "Noto Color Emoji;">The next major transformation was soon to follow in 2015, when RBI announced the provisional licences for ten Small Finance Banks (SFBs), eight of them being leading microfinance NBFCs. The purpose was to provide basic financial services for the vast sections of the economy not served by existing banks.
<span style="color: rgb(53,53,53);background-color: rgb(255,255,255);font-size: 14px;font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, "Helvetica Neue", Arial, "Noto Sans", sans-serif, "Apple Color Emoji", "Segoe UI Emoji", "Segoe UI Symbol", "Noto Color Emoji;">The second major crisis to follow was in November 2016 when demonetisation was announced. At this time, the SFBs were in the process of transforming into banks. Unlike the previous crisis, which was restricted to Andhra Pradesh, this one affected operations across the country, as microfinance customers operated in a predominantly cash-based economy. As the microfinance sector recovered and started to grow, the next major crisis to hit it was the devastating Covid pandemic in 2020-21. This tested the resilience of the industry, as it became a national concern over a prolonged period. The nature of the pandemic brought field work to a grinding halt. Today, the microfinance industry has a strong Pan-India presence and has expanded from rural India to cover semi-urban as well as urban India.
<span style="color: rgb(53,53,53);background-color: rgb(255,255,255);font-size: 14px;font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, "Helvetica Neue", Arial, "Noto Sans", sans-serif, "Apple Color Emoji", "Segoe UI Emoji", "Segoe UI Symbol", "Noto Color Emoji;">From Microfinance to Microbanking
<span style="color: rgb(53,53,53);background-color: rgb(255,255,255);font-size: 14px;font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, "Helvetica Neue", Arial, "Noto Sans", sans-serif, "Apple Color Emoji", "Segoe UI Emoji", "Segoe UI Symbol", "Noto Color Emoji;">With a modest beginning to providing small-ticket loans to borrowers with limited means, to achieving a bigger objective of financial inclusion in the country, the industry has evolved in advancing into a full-fledged banking service.
<span style="color: rgb(53,53,53);background-color: rgb(255,255,255);font-size: 14px;font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, "Helvetica Neue", Arial, "Noto Sans", sans-serif, "Apple Color Emoji", "Segoe UI Emoji", "Segoe UI Symbol", "Noto Color Emoji;">From SHG/JLG group loan asset products to individual loans for matured customers, the offerings of the industry expanded to secured loans such as micro-LAP for housing (Rs 3-10 lakh); micro business loans (up to Rs 3 lakh); agricultural and allied loans, two-wheeler loans, gold loans, savings and fixed deposits, insurance (life, health, and general), along with addressing payment needs (QR code and UPI-based bank payments).
<span style="color: rgb(53,53,53);background-color: rgb(255,255,255);font-size: 14px;font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, "Helvetica Neue", Arial, "Noto Sans", sans-serif, "Apple Color Emoji", "Segoe UI Emoji", "Segoe UI Symbol", "Noto Color Emoji;">Banks have expanded their financial products to meet the full range of financial needs of the aspiring customer base. This implies that customers now have multiple relationship points with their financial service provider (banks), leading to increased stickiness in the relationships. With these changes, microfinance has transformed to microbanking. It also moved from purely women-centric customer base to a gender-agnostic relationship with the household.
<span style="color: rgb(53,53,53);background-color: rgb(255,255,255);font-size: 14px;font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, "Helvetica Neue", Arial, "Noto Sans", sans-serif, "Apple Color Emoji", "Segoe UI Emoji", "Segoe UI Symbol", "Noto Color Emoji;">The beauty of India's pyramid is that it is moving more towards a diamond structure. As per reports on domestic household income data, the low-income group (less than Rs 1.25 lakh) is rapidly moving up towards the Rs 1.25 lakh to Rs 5 lakh bracket.
<span style="color: rgb(53,53,53);background-color: rgb(255,255,255);font-size: 14px;font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, "Helvetica Neue", Arial, "Noto Sans", sans-serif, "Apple Color Emoji", "Segoe UI Emoji", "Segoe UI Symbol", "Noto Color Emoji;">These aspiring middle-class families ('Aspirers') are growing their income and evolving in all aspects. In this process, they are creating demand for multiple financial products and services to bring about an impa-ctful financial inclusion.
<span style="color: rgb(53,53,53);background-color: rgb(255,255,255);font-size: 14px;font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, "Helvetica Neue", Arial, "Noto Sans", sans-serif, "Apple Color Emoji", "Segoe UI Emoji", "Segoe UI Symbol", "Noto Color Emoji;">These aspirants are no longer a weak economic section that depends on a single source of income. The families have two or more income sources, which creates a big change. This reduces their vulnerability to external shocks on one income stream, such as poor monsoon or floods, or loss of job, or even the demise of a family member. In terms of loan repayments, the microfinance segment has been one of the better-performing asset classes.
<span style="color: rgb(53,53,53);background-color: rgb(255,255,255);font-size: 14px;font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, "Helvetica Neue", Arial, "Noto Sans", sans-serif, "Apple Color Emoji", "Segoe UI Emoji", "Segoe UI Symbol", "Noto Color Emoji;">Though the repayments were affected during major black swan events like the Andhra crisis, demonetisation, and the Covid pandemic, the borrowers were resilient enough to repay their dues and return to the borrowing cycle and grow their livelihoods. Post-Covid crisis, the microbanking business was the first to revive, and the customers who had overdue payments started repaying the loans.—IANS

Microfinance in India has a long history. Since the turn of this century, it has been expanding rapidly as a viable financial services

Microfinance Grows By Nearly 10 Times In 10 Years To Cross Rs 5L-Crore Mark

New Delhi: According to the research, the microfinance loan portfolio grew by 22% in 2022-23, reaching Rs 3.48 lakh crore.
As of March 31, 2022, the total amount of loans held by a bank was $2.85 trillion.
Disbursements of microloans increased by 23% in FY 2022-23, reaching Rs 2,96,423 crores from FY 2021-2022's level of Rs 2,39,433 crores.—Inputs from Agencies

According to the research, the microfinance loan portfolio grew by 22% in 2022-23, reaching Rs 3.48 lakh crore.

Microfinance loan portfolio rises by 22% to Rs 3.48 lakh cr in FY'23

Mumbai: Stating that some Non Banking Finance Company-Microfinance Institutions (NBFC-MFIs) are making wider net interest margins, RBI Governor Shaktikanta Das on Wednesday asked entities to be "judicious" in using the flexibility on the interest rates they charge from borrowers. Speaking at the annual Fibac event, Das said the microlending segment serves marginalised clientele and has emerged as an important financial conduit to foster financial inclusion.  "Though the interest rates are deregulated, certain NBFC-MFIs appear to be enjoying relatively higher net interest margins. It is indeed for microfinance lenders themselves to ensure that the flexibility provided to them in setting interest rates is used judiciously," he said.  It can be noted that following the crisis in the microfinance segment in Andhra Pradesh that had also led to the creation of the NBFC-MFI segment, the Reserve Bank of India (RBI) had capped the maximum interest which lenders can charge at 24 per cent. The rate regime was deregulated it in 2021, making it possible for entities to charge as much as they want.
Das acknowledged that such entities have to bear in mind the affordability and the repayment capacity of the borrowers while setting their interest rates.
—PTI

Stating that some Non Banking Finance Company-Microfinance Institutions (NBFC-MFIs) are making wider net interest margins, RBI Governor Shaktikanta Das on Wednesday

The Hawk

Tag : Microfinance

ED raids Mannapuram Finance in Kerala

Chirag Kaul

The Hawk

Tag : Microfinance

ED raids Mannapuram Finance in Kerala

Chirag Kaul

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