Kolkata: Muthoot Microfin will reduce its lending rates by a quarter of a percentage point this month, making it the third rate cut this year by the microfinance company to pass on the benefit of lower cost of funds to borrowers.The company’s board at a meeting on November 5 decided to maintain the net interest margin (NIM) at 12.75-13.00% and adjust the lending rates accordingly, chief executive Sadaf Sayeed told ET.The decision to maintain the NIM in a band comes a few weeks after the Reserve Bank of India pulled up two microfinance lenders — Asirvad Micro Finance and Arohan Financial Services — for charging “excessive” interest rates from borrowers compared with the cost at which they raise funds. A few more lenders are also likely to review their pricing policies following the October 17 RBI strictures against the two companies.Muthoot Microfin had reduced its lending rate by 55 basis points, or 0.55 percentage point, in January and another 35 basis points in July. With the latest cut proposed, the lending rates would reduce to 23.05% at the lower end and 23.6% at the higher end.Despite the rate cut, the Kerala-headquartered lender's NIM improved by 57 basis points year-on-year and 7 basis points quarter-on-quarter as of end-September. The NIM was 12.94% for the first half of the year, compared with 12.37% in the year-earlier period. This was helped by its ability to reduce cost of funds. The lender's incremental cost of funds for the September quarter was 11.06% against 11.07% in the preceding quarter and 11.2% in the year-ago quarter.The non-banking finance company-microfinance institution (NBFC-MFI) saw its gross loan portfolio growing 15.2% year-on-year to Rs 12,518 crore at the end of September. It disbursed Rs 2,674 crore during the second quarter, around 21% higher than what it did in the preceding quarter.Its borrower base grew 7.7% year-on-year to 3.4 million. Southern markets accounted for about half its outstanding loans.
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