AP action axes SKS Microfinance stock

What is more,the Reserve Bank of India today announced the constitution of a sub-committee to look into the functioning of MFIs,as they have drawn flak for using strong arm tactics to recover loans.

SKS Microfinance Ltd,the only listed MFI in the country,settled the day at Rs 1,130.30,down by 6.79 per cent on the Bombay Stock Exchange. During the day,it fell by 8.70 per cent to hit a low of Rs 1,107.

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

SKS Microfinance,founded by Vikram Akula — who is also the Executive Chairman of the company — is headquartered at Hyderabad.

Yesterday,Department of Financial Services Secretary (in the Ministry of Finance) D Gopalan had said 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 the business of MFIs was likely to come under regulatory or judicial intervention,considering the socio-political sensitivity of rural lending.

A short while ago,the Finance Ministry had asked public sector banks to ensure that these institutions do not charge a loan rate of above 24 per cent.

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