on the NBFC MFI vs SFB debate, noticed interesting additional points made in today’s upgarde by MS of SKS that have not been made in the discussion above:
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The funding environment for NBFC MFIs (SKS, Satin) improve further as the licence winners transition to become SFBs. As many of these MFIs become SFBs (for whom the priority sector lending target
will be 75% of credit), the void in the supply of priority sector loans will have to be filled by other MFIs. This should result in a favorable environment for NBFC MFI’s. The NBFC MFI’s indeed appear to be in a sweet spot next 3 years… -
A key point to monitor will also be if the RBI puts in spread caps for SFBs and commercial banks similar to MFIs – currently there exists regulatory arbitrage. If the objective in introducing the SFB is to ensure affordable borrowing by the poor, which would seem to be the case, putting spread caps for them to avoid predatory lending would make sense. In that case the lower deposit cost benefit for SFB might actually get passed on to customers and equity owners may not benefit.