Amid criticism faced by MFIs over exorbitant interest rates charged from the poor, SKS Microfinance today said it is willing to reduce the rate at which it lends money, if the RBI or the government asks it to do so.
The statement comes within hours of Andhra Pradesh promulgating Special Ordinance to rein in microfinance institutions (MFI) in the state.
MFIs have attracted criticism from various quarters for charging very high interest rates on loans and for their strong arm tactics for recovering money.
Meanwhile, the Reserve Bank said it has formed a sub-committee to look into the functioning of MFIs.
"We are willing to reduce our rate of interest if the RBI or Finance Ministry asks us to do so. We reduced rate of interest in the past, voluntarily. We are ready to lend at 24 per cent," SKS Microfinance Founder and Executive Chairman Vikram Akula said.
SKS Microfinance currently charges 26 per cent interest rate.
Akula added that the Reserve Bank has not asked it to cap interest rates so far.
The issue of capping of interest rate charged by MFIs has divided the stakeholders. However, a legislation being prepared by the Centre on MFIs is not likely to cap the interest rates.
The Andhra Pradesh government today issued an ordinance to rein in MFIs, whose coercive tactics led to a number of people committing suicides in the state recently.
Christened 'Andhra Pradesh MicroFinance Institutions (regulation of money lending) Ordinance, 2010', the Ordinance came into force today with the Governor E S L Narasimhan giving assent to it.
When asked about the ordinance, Akula said, "As an NBFC, SKS is under the purview of RBI and is regulated by it. The state government will have to take up (the issue) with RBI and Finance Ministry as far as interest rates are concerned."
The ordinance is aimed at regulating the functioning of MFIs as well as checking their strong arm activities to force borrowers to repay the loan.
Last month, the Finance Ministry had asked public sector banks to ensure that these institutions do not charge a loan rate above 24 per cent.
Since the microfinancers take loans from the banks and lend it to customers at a hefty interest rate of as much as 36 per cent, the government is now insisting that public sector lenders must ask MFIs to cap their lending rates in the range of 20-24 per cent as a precondition to access bank finance.
Microfinance institutions usually provide financial services in unbanked areas, lending mainly to rural customers.
Finance Minister Pranab Mukherjee had earlier said that MFIs are charging high interest rates and they need to be reduced. He added that the Centre is closely monitoring them.
While the banks charge interest rates in the range of 9-14 per cent on loans given to MFIs, some MFIs in turn charge as much as 36 per cent from their clients.
Yesterday, Department of Financial Services Secretary D Gopalan had said the government is in the process of working out regulations for MFIs.
SKS Microfinance, founded by Vikram Akula -- who is also the Executive Chairman of the firm -- is headquartered at Hyderabad.
Currently, there are about 800 registered MFIs in India. SKS Microfinance Ltd, the largest micro financier in the country, disbursed loans of over Rs 14,000 crore till March to nearly seven million borrowers.
