CRISIL has assigned its ‘CRISIL BB-/Stable’ rating to the cash credit facility of Rashtriya Seva Samithi (RASS).
The rating reflects RASS’s comfortable asset quality and adequate capitalisation. These rating strengths are partially offset by the significant concentration of RASS’s microfinance operations in Andhra Pradesh (AP), weak earnings, and susceptibility to heightened regulatory and legislative risks associated with the microfinance sector and to constrained funding environment for microfinance institutions (MFIs).
CRISIL believes that RASS’s asset quality will remain comfortable and its capitalisation, adequate, over the medium term. However, RASS’ scale of operations is expected to remain modest and its resource profile and earnings, weak, over the medium term. The outlook may be revised to ‘Positive’ if RASS procures additional resources and grows its loan portfolio substantially, while maintaining its asset quality. Conversely, the outlook may be revised to ‘Negative’ if RASS continues to reduce its disbursements for a prolonged period or if its asset quality deteriorates significantly.
About Rashtriya Seva Samithi
RASS is a non-governmental organisation (NGO)-MFI established in 1981 under the Societies Act, with its registered office in Tirupati (AP). RASS is currently implementing 39 different welfare and development programmes in AP, Tamil Nadu (TN), Orissa, and Delhi; it receives funding support from the Government of India, several state governments, and international donor agencies, such as Christian Children’s Fund, USA, Help Age International, UK, and Aide-et-Action, EU. Most of the developmental programmes are focused on women and child development and welfare of the physically challenged.
RASS’ microfinance programme was started in 1989 while implementing Integrated Child Development Services projects in Tirupati. The microfinance programme involves rendering services to women self-help groups. RASS’s microfinance operations are concentrated in Chitoor district of AP (90 per cent of total loan outstanding as on March 31, 2011) and Thiruvallur district of TN (10 per cent of total loan outstanding). As on March 31, 2011, the NGO-MFI had loans of Rs.540.70 million outstanding, and it disbursed Rs.580 million during 2010-11 (refers to financial year, April 1 to March 31).
RASS, reported a net income (net of total expenditure) of Rs.0.8 million for 2010-11, as against a net income of Rs.3 million for 2009-10. For its microfinance programme, the society reported a net income of Rs.45 million on a total income of Rs.124 million for 2010-11, as against a net income of Rs.28 million on a total income of Rs.97 million for 2009-10.