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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.
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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.
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Built on more than 15 years of equity research, our framework combines quality assessment, intrinsic value estimation, and a sensible margin-of-safety approach.
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MoneyWorks4Me method for rating and ranking mutual funds for SIP
MoneyWorks4Me rating and ranking of funds for SIP is available to subscribers only. Moneyworks4Me is not a rating and
ranking agency, however it is required that users have a way of selecting funds and building a Portfolio. The method used by it are described below to enable users to understand the logic behind the rating and ranking Subscriber will find more details on this in the
various content made available from time to time. In case you need more please write to besafe@moneyworks4Me.com
MoneyWorks4Me rates and ranks mutual funds based on the following data-driven system:
Performance Consistency: This is measure based on whether the fund has beaten the benchmark index consistently. For
this we compare the 3-year rolling returns of the fund with the benchmark for a minimum of 5 years and preferable 10
years. The period of rolling is one month and holding period is 3 years. Fund are color-coded Green on Performance when
the fund beats the benchmark more than 90% of the time. It is Orange if it beats 80% to 90% of the time and Red if less
than 80%. Funds with less than 5 year data are color-coded Grey.
Quality of Portfolio Holding: Moneyworks4Me has color-coded stocks as Green, Orange and Red based on whether the
company's performance has generated a ROCE above a threshold level (cost of capital) over 10 years (minimum 6 years) and
generated positive Free Cash Flow. For Banks it checks whether ROE is greater than 15% and sales has grown over previous
year. Stocks that perform consistently on these combined metrics are color-coded Green (min score 14 out of 20), Orange
(between 8 and 14) and Red (less than 8 out of 20).
Fund are color-coded Green provided the portfolio has 70% holding in Green stocks but not more than 20% in Red stocks.
Funds with more than 20% Red stocks in the portfolio are color-coded Red. The rest are Orange funds
Funds ranking in screeners: Performance Consistency and Quality are two parameters used for ranking funds for SIP. The
ranking as follows GG, GO, GR, OG, OO, OR, RG, RO and RR.
With the same color-coded funds, the one with the higher Average 3-year rolling returns (over 5 to 10 years), the number
that appears in the Performance tag, ranks higher.
Here is the summary:
The third tag Upside Potential is not relevant for SIP. It is relevant for lumpsum investments in Mutual Funds.
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Q : Quality :- Q Very Good
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P : Performance (%)* 14 Very Good
14 Somewhat Good
12 Not Good
Less than 5 year data
Q : Quality of Holding Q Very Good
Q Somewhat Good
Q Not Good
*Color code for outperformance consistency
*Number is average 3 year rolling returns
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