The talks have begun, three people familiar with the matter told ET. There’s no certainty on which of the negotiations would conclude in a transaction.
Axis Bank already has a micro lending vertical and acquisition of a microfinance company may suit well in its strategy to reach out to the deeper pockets of the market, a person familiar with the matter said. Axis already has 1.5 million microfinance borrowers under its belt.
“The bank is exploring early stage talks with a few microfinance lenders. It’s too early to talk about it as nothing has been finalised yet, but the idea is to widen the footprint in the rural and priority sector space,” said an official who was aware of the talks. “The bank also feels that such a buyout would help to increase its presence in eastern and southern India.”
Getting acquired also suits MFIs especially those without strong promoter backing. Micro lending needs regular infusion of capital to keep pace with the lending growth. Bharat Financial Inclusion, which was the largest MFI before being acquired by IndusInd, was stifled for growth as it had to promoter backing.
India’s Rs 2.48 lakh crore microfinance sector grew by 17% year-on-year even in the pandemic ravaged FY21, reflecting the opportunities available in this space. Universal banks control 44% of the market while NBFC-MFIs have 32% share. The balance is with small finance banks, other non-banking finance companies. NGO-MFIs have around 1% of the market share.
“For any possible acquisition, it’s important for Axis Bank to check whether the MFI has a robust IT system. Otherwise, it would be a tedious task for the bank to integrate the IT platforms,” said a person who was part of the IndusInd-Bharat Financial merger process.
Axis Bank did not respond to ET’s mail.
Arohan Financial Services managing director Manoj Nambiar and Satin Creditcare Network chairman HP Singh declined to comment on the matter while Spandana managing director G Padmaja Reddy did not respond to calls and text messages.
Microfinance is a way of unsecured lending to economically weaker populations, especially women, but prospects of higher returns push banks to explore such businesses. The acquisition route helps banks to get rural loan pie on a platter. IndusInd acquired Bharat Financial in 2019, three year after
‘s acquisition of BSS Microfinance.
