SEBI Reg. Investment Advisor

Download App

MoneyWorks4Me

RBI turns down banks request for restructuring securitized papers of MFIs.

20 May 2011 Evaluate
The Central bank has turned down a request from banks to restructure securitized papers bought from microfinance institutions (MFIs). In securitization, MFIs bundle up micro loans while structuring debt papers around it. Microfinance institutions are estimated to have issued securitized papers worth Rs 4,000 crore to banks.

Banks lend to MFIs either directly or by purchasing securitized papers.  A number of private banks had appealed to RBI to restructure securitized papers. However, some private banks and public banks opposed it on grounds that the reworking loans would hit financial ratios of MFIs.  Bankers against restructuring of securitized papers said if the central bank had allowed restructuring, it would not be considering as true sale. Banks classify securitized papers purchased from MFIs as priority sector loan and not direct exposure to MFIs. On the other hand, banks in favour said even as the portfolio is sold to banks, MFIs are servicing the loan on behalf of banks that hold the pass through certificate.

The RBI said in a note to Indian banks’ Association that the securitized portfolio that banks have been acquired from microfinance institutions will not be considered for restructuring under special dispensation. The central bank did not give any motive for rejecting the request. However it said that loans given by banks in consortium to microfinance institutions may be considered for restructuring.

In corporate debt restructuring, an obliged company is normally given relaxation in refund schedule and interest rates, on conditions such as restrictions on new lending and borrowing. The corporate debt restructuring forum is likely to be in talks with half a dozen MFIs to revise almost 10,000-crore loans.

Last year Andhra Pradesh government had issued an ordinance, to restrain new loans and recovery, Microfinance institutions had requested banks to set up a fund to infuse liquidity into the cash-strapped system and sought the RBI intervention to build the fund.

About MoneyWorks4Me

MoneyWorks4Me is a SEBI-registered Investment Adviser (IA) dedicated to helping investors build long-term wealth through transparent, research-driven, conflict-free guidance. Founded in 2008, we started our journey as a Research Analyst (RA), providing deep fundamental analysis, intrinsic value insights, and long-term investing frameworks for Indian equities. In 2017, we transitioned to a full-fledged SEBI-registered Investment Adviser, strengthening our commitment to acting as a fiduciary—always putting the investor’s interest first.

Our Vision

To become India’s most trusted, research-powered fiduciary advisory platform—where every investor, regardless of experience, can make calm, confident, and well-reasoned investment decisions.

What Makes MoneyWorks4Me Different

Our Approach: Ensuring compounding work its magic on client portfolio.

MoneyWorks4Me ensures this through:

×