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FIMBank plans to infuse $100 mn in India Factoring

Malta-based trade finance entity FIMBank plans to infuse about $ 100 million in India Factoring and Finance Solutions Ltd (IFFSL) through the next five years. In April, the bank had acquired an additional 30 per cent stake in IFFSL from Punjab National Bank for Rs 107 crore.

Given the huge scope for trade finance in India, the Kuwait Projects-owned FIMBank is considering setting up a trade finance bank in India. This follows the Reserve Bank of India framing norms for specialised banks.

Margrith Lütschg Emmenegger, president of FIMBank and director on the board of IFFSL, said now, the bank held about 75 per cent stake in IFFSL. In the next two years, it would invest $ 20 million to meet regulatory norms, she added.

FIMBank plans to increase the scope of its business in India. “Now, there is much more we can think of doing in India, such as pre-export finance and financing for commodities. Being in trade finance, we will look at a specialised banking licence in India. The Reserve Bank of India has spoken about a differentiated licensing regime in India,” Emmenegger said.

For FIMBank, a specialised banking license (for trade) would be viable, as it would allow acceptance of deposits, make funding attractive and offer cheaper rates to small and medium enterprises (SMEs), she added. If all went according to plan, IFFSL will need $ 100 million of equity in the next five years, she said.

While FIMBank is expanding presence in India by opening branches in tier-II cities, the stretched economic slowdown and delayed payments to SMEs have taken a toll on its asset quality. According to an Icra report, stress in IFFSL’s portfolio had increased, with gross non-performing assets (NPAs) at 8.49 per cent in September 2013, against 4.85 per cent in March 2013. During the same period, net NPAs rose from 1.7 per cent to 4.18 per cent.

Emmenegger said the Indian economy was passing through a difficult phase.

“The company has seen a rise in non-performing assets in 2012 and started adjusting to the situation. We are stringent and are trying to mitigate risks. It is a question of managing risks well, along with profitability. If profitability is down due to the economic slowdown, that is fine,” she added.

SPREADING WINGS

* FIMBank plans to infuse about $ 100 mn in India Factoring through the next five years

* In April, the bank had acquired an additional 30 per cent stake in IFFSL from Punjab National Bank for Rs 107 crore

* Reserve Bank of India had recently framed norms for specialised banks

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