IndusInd Bank to Sell Rs 1,573 Crore of Non-Performing Microfinance Loans


➡️ Click here to join our Whatsapp Group

Private sector lender IndusInd Bank is planning to offload Rs 1,573 crore worth of non-performing microfinance retail loans due to rising stress in the microfinance sector. The bank will auction these distressed assets through a public bidding process to interested entities.

The loans, which come from over a million accounts, are unsecured and the bank is seeking full cash offers for the sale. The reserve price for these assets has been set at Rs 85 crore, which represents a recovery of just 5.04%. Entities interested in participating in the auction are required to submit their expression of interest (EOI) by December 30.

Despite the challenges facing the microfinance sector, industry insiders believe there could still be demand for these loans, provided the price is right. They suggest that if banks sell the loan pool at around 10% of the outstanding book value, there could be strong interest from potential buyers.

IndusInd Bank’s financial performance has been impacted by the stress in its microfinance portfolio. The bank’s net profit dropped nearly 39% year-on-year due to higher provisions, primarily linked to rising issues in its microfinance segment. At the end of the September quarter, the bank reported outstanding slippages of Rs 2,259 crore in its microfinance book, up from Rs 1,998 crore in the previous quarter.

As of the September quarter, IndusInd’s microfinance portfolio stood at Rs 32,723 crore, accounting for 9% of its total loan book. This portfolio has contracted due to the stress in the segment, which has also affected the bank’s profit margins. According to the bank’s management, the lower contribution from microfinance, which traditionally earns higher yields, has impacted margins by nearly 1%.

The microfinance sector has faced persistent challenges in recent months, with rising asset quality issues and unchecked credit growth. Problems such as the issuance of loans based on fake voter ID cards have led to overleveraging among borrowers. According to a report by Motilal Oswal, the stress in the microfinance industry is expected to last throughout FY25, with signs of recovery likely only by the start of FY26.

Earlier this year, Ujjivan Small Finance Bank also sought to offload Rs 270 crore worth of non-performing microfinance loans, with a significant portion already written off. The bank had set aside an 85.61% provision for the loans it was looking to sell.

IndusInd Bank has yet to respond to media inquiries regarding the auction details.

Leave a Reply

Your email address will not be published. Required fields are marked *

Home
Calculators
Menu
Search