SKS Microfinance shares dip by 9% after AP govt ordinance

SKS Microfinance shares dip by 9% after AP govt ordinance

Mumbai: Shares of SKS Microfinance, the only listed microfinance entity in the country, plunged on Friday by about 9 % on concerns that microfinance sector may come under tight government regulations.

Yesterday, Andhra Pradesh government approved a special ordinance to rein in microfinance institutions (MFIs) in the state. MFIs have attracted criticism from various quarters for charging high interest rates on loans.

Soon after opening, the scrip came under selling pressure on the BSE and hit a low of ,107, down by 8.70 %. In the afternoon trade, SKS was quoting at 1,137.95, lower by 6.16 % on the BSE.

“The fall in stock is mainly on concerns of regulatory issues," an analyst, who did not wish to be quoted, said.

SKS Microfinance, founded by Vikram Akula - who is also the executive chairman of the firm-is headquartered at Hyderabad.

Yesterday department of financial services secretary (in the ministry of finance) D Gopalan had said that the government was in the process of working out regulations for microfinance institutions.

“There is a regulation for financial institutions in the offing. We are consulting with the stakeholders... It has to be taken forward, which means we have to take it to cabinet... then it has to be taken to Parliament and there are timelines for all this...," he told reporters in Chennai.

In a recent report on MFIs, brokerage house Indiabulls Securities had said that the business of MFIs was likely to come under regulatory or judicial intervention, considering the socio-political sensitivity to rural lending.

A short time ago, finance ministry had asked public sector banks to ensure that these institutions do not charge a loan rate of above 24 %.

Compared to urban lending, MFI lending rates in the rural areas are much higher.