New rules unlikely to hurt lending rate: SKS

New rules unlikely to hurt lending rate: SKS

New Delhi: SKS Microfinance, India’s leading lender to tiny businesses, said on Monday that moves by a state government to cap interest rates was unlikely to impact its lending rates.

On Friday, media reports had said the Andhra Pradesh government imposed a limit on rates that the industry can charge customers and also curbed aggressive recovery practices following several suicides by borrowers in the state.

SKS, whose investors include US billionaire George Soros, venture capitalist Vinod Khosla and Infosys founder NR Narayana Murthy, said it was seeking legal clarifications on the move.

Microfinance Institutions Network, an industry lobby group, plans to challenge the ordinance, SKS said in a statement.

Andhra Pradesh contributes 28 % of the current loan portfolio of SKS, it said.

Microfinance firms typically give loans to small businesses that have no access to banks and charge an effective rate of 28-32 % a year, about double the rate on bank loans.

SKS shares, which fell 7 % on Friday, lost another 6.5 % to Rs1,056.25 by afternoon on Monday in a subdued Mumbai market.