Almost a third of loans that banks have given to microfinance institutions have been admitted for restructuring.
This follows the inability of MFIs to repay.
The Corporate Debt Restructuring cell has admitted loans worth Rs 6,473 crore (Rs. 64.73 billion) involving five microfinance companies.
These were Asmitha Microfin, Future Financial Services, Share Microfin, Spandana Sphoorthy Financial and Trident Microfin, banking industry sources told Business Standard.
Their total debt is Rs. 7,411 crore (Rs. 74.11 billion).
The Reserve Bank of India, which has allowed banks to recast the debt of MFIs without lowering the asset quality - as a one-time measure - had earlier extended the restructuring deadline from March to June.
Microfinance companies have been facing a crisis after a crackdown by the Andhra Pradesh government last year in response to allegations they were charging high rates and using coercive recovery practices.
This has led to a steep fall in their collections. The state accounts for a third of the microfinance loan market.
The outstanding loans given by banks and Small Industries Development Bank of India to microfinance companies were Rs. 13,800 crore as on March 2010, according to the Malegam Committee report.
The committee was set up by RBI to study the issues the sector was facing. In addition, banks hold securitised paper worth Rs. 4,200 crore (Rs. 42 billion).
"After March 2010, when the sector was at its peak, the outstanding loans were close to Rs. 25,000 crore (Rs. 250 billion). There has been no fresh lending to the sector since October and microfinance companies have been repaying some of these loans," said Alok
Prasad, chief executive officer of the Microfinance Institutions Network, indicating that the outstanding loans to MFIs have not risen significantly over the last one year.