Mumbai, March 29: SKS Microfinance Ltd — the first microfinance company to list on the bourses — has sold Rs 550 crore of loans to banks. The securitisation transaction is expected to augment the liquidity position of the microfinance institution (MFI).

Securitisation is a process by which an entity transfers a pool of loans to another company.

Most of the MFIs took recourse to this process to boost their liquidity before the Andhra Pradesh government introduced its ordinance on microfinance institutions.

Banks also benefited from the transaction as this helped them to achieve their priority sector lending targets.

SKS Microfinance today announced that it had securitised a part of its loans in two transactions of Rs 310 crore and Rs 240 crore. This assignment followed securitisation of Rs 60 crore with a non-banking finance company earlier this month. According to SKS Microfinance, the securitisation is of receivables from 750,000 micro borrowers as defined by the RBI.

Pool receivables came from 18 states where SKS operates. Andhra Pradesh is not one of the 18 states. The pool is well diversified with a single branch accounting for less than 1 per cent of the pool, with the average loan amount being Rs 12,000.

“The transactions will augment the liquidity position of SKS Microfinance. One of the transactions for Rs 310 crore represents the single largest rated pool assignment in the Indian MFI sector,” said S. Dilli Raj, chief financial officer of SKS Microfinance.