Amid reports of suicides by small loan borrowers and talk of a regulator to monitor the microfinance industry, market leader SKS Microfinance today announced that it has “voluntarily” slashed interest rates.
In full-page advertisements issued in vernacular dailies today, the company said it has reduced interest rate from 26.69 per cent to 24.55 per cent (depreciating) or a flat 12.55 per cent per annum.
The move is seen as a damage control exercise by the Hyderabad-based company given the negative publicity starting from the sacking of SKS Microfinance CEO S Gurumani and a spate of suicides by borrowers, although SKS has maintained they were unrelated.
Earlier this month, the Andhra Pradesh government promulgated an ordinance to check coercive recovery methods employed by MFIs.
According to Dilli Raj, Chief Financial Officer, SKS Microfinance, the interest rate reduction was a “voluntary” action.
“This is a voluntary action from our side. We were able to reduce interest rate in AP considering the scale of operations (in the State),” he told PTI.
“We are willing to reduce our rate of interest (rate) if the RBI or Finance Ministry asks us to do so. We had reduced rate of interest in the past, voluntarily. We are ready to lend at 24 per cent,” SKS Microfinance Founder and Executive Chairman Vikram Akula had said earlier.
Replying to a query, Mr. Dilli Raj said the rate reduction will not have any impact on top line or bottom line of the recently-listed firm.
Data received from most of the SKS centres indicated that loan collection is in the range of 90 per cent, he said.
“Even in the past two weeks we have conducted meetings wherever it is possible. The information clearly says the customers are with us.”
On October 15, the Andhra Pradesh Government promulgated an ordinance imposing some curbs on the microfinance institutions (MFIs) operating in the State.
The notification affected MFIs’ day-today operations, which was later restored after the companies moved the Andhra Pradesh High Court.
The court directed the firms to register themselves with the Government within a week as mandated by the ordinance.
About 30 persons have died in the State in the last few weeks reportedly due to the harassment by MFIs, official sources have said.