"This is the fourth interest rate reduction, aggregating 4.8 per cent, announced by the company since October 2014. The reductions are consistent with the company's policy of passing on the cost advantages accruing from reduction in the cost of borrowing and economies of scale to its borrowers," SKS Microfinance said in a BSE filing.
The company said this is the fourth time the company has reduced interest rate since October 2014. It had earlier slashed rate by 1.25 per cent in September.
With the reduction, the company becomes the first microfinance institution to charge a sub-20 per cent rate on its core income generating loans (IGL), which are unsecured micro loans.
The interest rate of 19.75 per cent is the lowest charged by any private sector MFI in the world, SKS said in a statement today.
The micro finance lender could reduce its marginal cost of borrowing to 11.3 per cent in the second quarter of 2015-16, from 13.6 per cent in 2013-14 due to downward adjustments in risk premium.
The figure for the first half of 2015-16 is expected to be lower than 11.3 per cent as the company has managed to secure refinance from MUDRA at 10 per cent and issued commercial papers at 9.5 per cent per annum in October and November 2015, it explained.