Press Release

Ratings of NRSP Microfinance Bank Limited placed on ‘Rating Watch-Negative’

Karachi, April 29, 2020: VIS Credit Rating Company Limited (VIS) has maintained the entity ratings of NRSP Microfinance Bank Limited (NRSPB) at ‘A/A-1’ (Single A/A-One). The medium to long-term rating of ‘A’ denotes good credit quality, with adequate protection factors. Moreover, risk factors may vary with possible changes in the economy. The short-term rating of ‘A-1’ denotes high certainty of timely payment, liquidity factors are excellent and supported by good fundamental protection factors. The Ratings have been placed on ‘Rating Watch - Negative’ status. The previous rating action was announced on April 30, 2019.

The assigned ratings incorporate presence of reputable sponsors carrying reasonable experience and understanding of the microfinance sector. Sponsor’s commitment has been demonstrated in the recent years in the form of both technical and financial support. VIS anticipates this support to continue in case the need arises. The ratings take into account continued augmentation of loan book mainly on the back of higher average loan size, supported by increasing focus on higher ticket loans and enhanced network. The bank reduced concentration of agri inputs loans in order to curtail the mounting pressure of non-performing loans (NPLs). Asset quality indicators of the bank remained under pressure during FY19 as well owing to slow economic growth, rising inflation, and issues pertaining to yield, pricing and purchase of agriculture produce. Given the current scenario concerning Coronavirus pandemic, the bank plans to consolidate its operations while restricting new loans during the ongoing year.

Incremental infection remained on the higher side on account of higher loan write-offs. Given higher provisioning expense recorded coupled with sizable increase in administrative expenses mainly on account of higher staff salaries and depreciation expense, operating self-sufficiency declined on a timeline basis. With increase in cost of funds, markup spreads were under pressure during FY19. The bank realigned markup rates on some agri and EMI-based loan products along with loan processing fee in order to support the bottom-line. Considering the ongoing lockdown situation, asset quality indicators may remain stressed in FY20 as well; meanwhile initiatives taken by the management to curtail infection include increase in the proportion of secured lending and EMI-based MSME products, especially housing and loans against gold as collateral.

Decline in liquid assets in relation to total deposits & borrowings was also noted due to utilization of some surplus liquidity towards financing activities. Deposit base remained largely stable, as the bank shed some fixed deposits in favor of current and saving deposits to rationalize cost of funds. The deferment of a portion of repayments against advances would impact the liquidity position of the bank, going forward. With marginal increase in equity base, net NPLs in relation to tier-1 capital remained on the higher side. CAR of the bank decreased to 15.4%, slightly above the minimum regulatory requirement of 15%. The bank is in process of mobilizing new borrowings of up to Rs. 1.5b, including Rs. 1b through Term Finance Certificates (TFC) as Tier-II capital in order to enhance capital adequacy. The ratings are dependent on improvement in key performance indicators, continued sponsors support and stability of operations post the recovery of markets after pandemic situation subsidies.

For further information on this rating announcement, please contact Syed Fahim Haider at 042-35723411-13 (Ext: 8006) or the undersigned at 021-35311861-70 (Ext. 306) or email at

Faryal Faheem Ahmed
Deputy CEO

Applicable rating criterion: Micro Finance Banks (June 2019)

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2020 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited