The Andhra Pradesh government is mulling to put a cap on the interest rates charged by the microfinance companies through a new law, a top bureaucrat said today.
The government, through an Ordinance promulgated earlier this month, has asked the state microfinance institutions (MFIs) to furnish details of the interest rates being charged by them and their area of operations.
According to the details available with the government, the average interest rate charged by these MFIs range between 24-36 per cent.
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He said the Ordinance will be replaced by an Act after being tabled and passed in the Assembly.
“We have received data from microfinance companies for registration as mandated by the Ordinance. We sought advice from the RBI and also the Central government to inform us, who is the competent authority to put ceiling on the rate of interest. We are waiting for their reply. Once we get the clarification we may put a cap on the rate of interest,” the official told PTI.
SKS Microfinance, which courted controversies after sacking its MD & CEO Suresh Gurumani, has informed the government that their effective rate of interest is between 28.87 and 31.08 per cent.
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It can be noted that SKS recently said that it has reduced the interest rate from 26.69 per cent to 24.55 per cent or flat 12.55 per cent.
When contacted, the company’s CFO Dilli Raj said the 31.08 per cent interest rate is inclusive of upfront interest, cost of borrowing and insurance.
SKS had disbursed loans to the extent of Rs 440 crore in seven districts and has an outstanding of Rs 246.72 crore.
City-based microfinance outfit Basix had informed the government that it charges 21.2 to 60.5 per cent interest rate in Khammam district of AP. However the company said it was a mathematical error and sought time from the government to correct it.
Sanjiv Viswanathan, CEO, BSFL (part of Basix group) said their effective rate of interest is between 32 to 34 per cent.
“In order to meet the deadline for data submission, incorrect computations have found their way in the data. In order to clarify this, we met Principal Secretary of Rural Development-Subramaniam Reddy today and he has agreed to give us time to resubmit our data. We are rechecking our loan data and in the next few days we would resubmit our information,” Mr. Viswanathan said.
While Fullerton India charges 36 per cent, L&T charges 30 per cent interest.
“With the festival season around, the demand for loans stands at an average of Rs 5000-Rs 15000 per borrower, the total credit demand comes to around Rs 500—800 crores,” the spokesperson said.