Public sector lender, Union Bank of India has made its entry into the field of microfinance in Andhra Pradesh. The bank has come up with a new scheme which would be engulfing 20 mandals in the state.

"We have decided to lend 20 mandals about Rs 50 lakh each and we would extend this to about 100 mandals in this fiscal, which will be about Rs 50 crore by way of cash credit facility. This is in addition to Self Help Group (SHG) financing that is taking place in the state," UBI Chairman and Managing Director M V Nair said.

Nair said that initially the 20 mandals were shortlisted from total of 1,090. "I see a tremendous scope in this type of financing, which is not high cost and allows them to repay at their ability. So it will... (meet) the requirement of under-financing which is seen in the SHGs," he said.

"We haven't taken any decision to reduce exposure on MFIs. It is an evolving situation and there's a regulation put in place, we are waiting for the Malegam committee's recommendation report and once that comes in, there will be a little more clarity on what should be our approach," he said.