PACRA Maintains Rating of NRSP Microfinance Bank Limited | Tier II TFC

The assigned rating of NRSP Microfinance Bank Limited (the “Bank”) reflects the sponsors’ continued financial support, management’s efforts to strengthen the balance sheet, and the visible enhancement in the Bank’s financial health. The parent organisation, NRSP Foundation, reaffirms its continuous financial commitment and remains prepared to provide additional equity support if required. Strengthened governance practices, enhanced risk management, and a renewed emphasis on operational efficiency continue to support the Bank’s credit profile, positioning it favourably for improved capital adequacy and profitability.
A key development during the review period was the significant strengthening of the capital position. The Capital Adequacy Ratio (CAR) improved to 3.37% as of Mar'25 (Dec’24: 1.0%), signalling a gradual recovery in financial stability and regulatory compliance. The equity injection by the parent company, along with internal profit retention and prudent balance sheet management, raised the Bank’s total equity to PKR 4.35bln as of Mar'25 (Dec’24: PKR 3.56bln). Furthermore, during the 3MCY25, the Bank maintained a steady trajectory of operational recovery within a gradually stabilising macroeconomic environment. While the microfinance sector continued to face challenges from inflationary pressures and agricultural vulnerabilities, it exhibited relative resilience supported by moderating prices and improved borrower cash flows amid a declining interest rate environment. As of March 2025, the industry-wide infection ratio stood at 8.3%, whereas the Bank reported a notably lower ratio of 3.5%, reflecting the improved cash flow profile of its borrower base, enhanced credit discipline, and effective recovery mechanisms. The Gross Loan Portfolio (GLP) remained broadly stable at PKR 36.5bln (Dec’24: PKR 37.0bln). Profit after tax reported at PKR 642mln for 3MCY25 (CY24: PKR 1.2bln), supported by improved recoveries, cost optimisation, and stable yield performance. Liquidity indicators remained sound, with a liquid-assets-to-deposits and short-term borrowings ratio of 54.8%, while deposits stood at PKR 52.8bln (Dec’24: PKR 55.0bln), maintaining a favourable funding mix.
The rating watch remains in place to monitor the Bank’s ongoing alignment with the regulatory CAR threshold of 15%. However, the Bank’s financial profile has begun to stabilise, supported by improved capitalisation, strengthened profitability, and steady asset-quality indicators.

About the Entity
NRSP Microfinance Bank Limited, incorporated in October 2008 under Section 32 of the Companies Act 2017. The Bank is established to promote financial inclusion and poverty alleviation and provides microfinance and related services to low-income and underserved segments. NRSP holds a majority share of ~57%, while other shareholders include IFC, PROPARCO, and Acumen Fund (USA).

About the Instrument
In July 2021, NRSP Bank issued an unsecured, unlisted, and subordinated NRSP Microfinance Bank Limited | Tier II TFC ("TFC" or the "Instrument") of PKR 770mln to strengthen its Tier II Capital. This 7-year TFC ranks pari passu with other Tier II instruments and above Additional Tier I instruments and common shares. It is callable after five years with SBP approval and carries a profit rate of 3MK plus 300bps, paid quarterly on the outstanding principal. The terms of the Tier II TFC require that, as per the Lock in Clause, neither profit nor principal, will be payable, if such payments will result in a shortfall in the bank's MCR/CAR or cause an increase in the shortfall.