India: Another MFI Cuts Interest Rates

May 2010
Bangalore, India, May, 26 2010 - Five-year old Ujjivan Financial Services,a Bangalore-based micro lender with 6.5 lakh poor customers,said it will reduce lending rates by up to 290 basis points from July,as it has earned a profit for the first time since inception.

Ujjivans announcement comes within a month of Bandhans decision to cut interest rates.

Bandhan Financial Services is the countrys fourth largest microfinance institution (MFI) with nearly 26 lakh borrowers. As we reach some scale,we have decided to pass on the benefits to our borrowers, Ujjivan managing director Samit Ghosh told ET. The reduction in Ujjivans interest rates will be applicable only to new loans and renewals,a company official said.

The new interest rates will be 190-290 bps below existing rates.The company will provide new business loans at 23% per annum from July against 25% now. It will also reduce interest on repeat business loans to 22% a year from 24.5% now.

Ujjivan,which operates in urban and semi-urban clusters,said it will reduce rates to 25% on fresh family loan from 26.9% a year.For repeat loans,the new rates will be 24% as against 26.9% now.The Reserve Bank of India (RBI) has been nudging us to reduce interest rates for a long while, Mr Ghosh said.

Ujjivan started operations under the guidance of Grameen Bank of Bangladesh and recorded a post-tax profit of Rs 9.63 crore in 2009-10.It has wiped out accumulated losses of Rs 5.85 crore and transferred Rs 1.9 crore to statutory reserves,the company said.It disbursed Rs 1,009 crore since its birth in November 2005.It operates across 16 states through its 250 branches.It has a sizeable presence in the south and the east.


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