SKS Microfinance Limited has begun scaling down its operations in Andhra Pradesh. The company has decided to close down 78 branches in the State and reduce the headcount by 1,200.
SKS at present employs over 3,400 people in 180 branches across the State. The company said the decision to close down its branches and cut the staff strength had become “urgent” in view of the present financial situation.
The decision comes as a fall-out of the AP MFI (Regulation of Money Lending) Act to regulate the MFI (micro finance institutions) business following complaints of harassment and coercive methods used by the SKS personnel for collecting their dues. SKS Managing Director and CEO M. R. Rao said the MFI business in the State had come to a standstill and the company had brought down the residual exposure to Rs.236 crore from a high of Rs.1,491 crore in 2010, writing off Rs.1,120 crore.
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The company, Mr. Rao said, incurred a loss of Rs.1,360 crore during the year ended March 31, 2012 and the operations in 17 other States had subsidised Andhra Pradesh operations for a good 18 months since the Andhra Pradesh MFI Ordinance was passed. “In view of the present financial situation, it is imperative that the Andhra Pradesh operations remain cash neutral in the interest of all stakeholders. Also, bank funding is restricted to operations in 17 other States,” he said.
Mr. Rao asserted that the company was not facing any liquidity or solvency issues and the company was only rationalising its workforce. “We reiterate that we are not closing down our Andhra Pradesh operations,” he said. The company was working closely with the State and Central Governments to bring business back to normal and would welcome the staff back into its fold as and when the situation improved.