SKS Microfinance, which went public recently, could not recover around Rs 1,400 crore this week. The company could not carry out its business activities due to the Andhra Pradesh Micro Finance Institutions (Regulation of Money Lending) Ordinance, 2010, that came into effect from October 15.
Compared to other microfinance institutions (MFIs), the impact of non-recoveries has been deeper on SKS. Microfinance institutions network, an association of MFIs, put the non-recovery by its members at Rs 250 crore.
SKS filed a petition in the High Court, seeking directions to the state government to allow MFIs to continue their business even as government streamlined the registration process.
SKS counsel said the ordinance was hurting the company deeply. “Tuesday is our recollection day. This time, we could not collect Rs 1,400 crore,” he said
From Rs 1,400 before the ordinance, the company’s share price tumbled to Rs 1,100. “The company’s effort is to maximise its capital with a social angle,’’ he said, adding that prolonged non-recovery would bring business to a grinding halt. SKS recently went public to raise Rs 1,500 crore.
Recovery agents could not be done away with, he stressed, citing the case of a motorcycle company using recovery agents to get payments.
SKS has 2,266 branches across India and a borrower membership of 7.3 million. As on September 30, it had disbursed Rs 16,670 crore on a group lending model, wherein loans are given to all persons in a group (usually ten) and each borrower stands the guarantee for the rest of others.