State Bank of India to increase microfinance portfolio by 50%

The lenders exposure to the MFI sector has a significant amount for micro lenders serving small borrowers.

State Bank of India plans to grow its microfinance portfolio by 50% in the fourth quarter, drawing comfort from the Reserve Bank of India's (RBI) move to frame guidelines for microfinance institutions.

SBI's move is expected to lift lender sentiment and offer a psychological boost to MFIs. "Although a few banks have started lending to this sector, most smaller and medium-sized MFIs have not still been able to get bank funding," Ujjivan Financial Services chief executive Samit Ghosh said. "Some banks are still apprehensive," he said.

The country's largest lender aims to increase its sectoral exposure to 1,300-1,400 crore by March this year from 900 crore in December, a senior SBI executive told ET. While SBI's exposure to the MFI sector constitutes a tiny portion of its loan book, it's a sizeable amount for micro lenders serving small borrowers.

The Microfinance Institutions Network, the umbrella organisation for the NBFC-MFIs, held a meeting with leading bankers last week to explore ways to increase lending to the sector. Officials of SBI and the Small Industries Development Bank of India were present at the meeting.

View the full story in Economic Times.