New Delhi: The microfinance business will now be dominated by small finance banks (SFBs) which will bring down systematic risk but at the cost of lower returns, said India Ratings and Research (Ind-Ra). Of the 10 shortlisted candidates for small bank license by RBI, eight are micro finance institutions (MFIs), one mainly a commercial vehicle financier and one a local area bank.
The total managed loan assets of the 10 SFBs was Rs 20,100 crore and balance sheet size was around Rs 22,200 crore in 2014-15, Ind-Ra said adding that MFIs that have received approval as a universal bank and SFBs, stood at 54 per cent of NBFC-MFI gross loan portfolio in FY15.
Under the banking format they can provide multiple financial products including savings to the under-served individuals and MSMEs, it said. Reserve ratios and deposit insurance will reduce systemic risk, and over time lower deposit cost could be transmitted to lower lending rates, it added.