For Spandana Sphoorty Financial, the second largest microfinance company in the country in terms of assets, the debt recast, which would help the company sail through current turbulent times, is likely to be delayed.

The company, along with a clutch of other MFIs had opted for corporate debt restructuring, as it was unable to collect repayments of loans handed out to the economically weaker section.

“Banks are asking for personal guarantees to ensure that the promoter’s attention in the company remains. After the crisis, the trust factor between banks and MFIs has strained and we are not sure if it would take off. While we have not opted out of it, we are in continuous talks with bank officials to reach a conclusion and a decision may be taken soon,”said a top company official.

The company has a debt of around Rs 2200 crore with 32 banks, led by ICICI and SIDBI in the CDR. The CDR now allows for the repayment in six years with a dropped interest rate of around 12 per cent.

“Despite the situation being worst we managed to pay off debt of around Rs 1000 crore after October. Typically, it would have taken at least 3 years to service the current debt outstanding if all our repayments were in place,” the official said.

The consortium has also offered to provide funding of around Rs 500 crore through loans. Other companies like, Share, Asmitha and Trident have also participated in it where as the largest MFI, SKS Microfinance had opted out.

The Andhra Pradesh government had last year put restrictions on operations of microfinance companies by way of the AP MFI Act, which led to a virtual halt of their business in the state. Around 60 per cent of Spandana’s business comes from this state and it operates in nine other states.

“Loan repayments in other states too have not been as good as earlier. At this point we cannot think of focusing on alternative structures and also being careful in handing out new loans in other states. We would restrict our business right now in other states as well as bankers are wary of doling out loans to MFIs,” the official added.