SKS Microfinance dips 9% after AP govt ordinance

Shares of SKS Microfinance, the only listed microfinance entity in the country, on Friday plunged about 9 per cent on concerns that microfinance sector may come under tight government regulations.

The Andhra Pradesh government had on Thursday approved a Special Ordinance to rein in microfinance institutions (MFIs) in the state. MFIs have attracted criticism from various quarters for charging high interest rates on loans.

Soon after opening, the scrip came under selling pressure on the Bombay Stock Exchange and hit a low of Rs 1,107, down 8.70 per cent. In the afternoon trade, SKS was quoting at Rs 1,137.95, lower by 6.16 per cent on the BSE.

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

SKS Microfinance, founded by Executive Chairman Vikram Akula is headquartered at Hyderabad.

Department of Financial Services Secretary (Ministry of Finance) D Gopalan had on Thursday 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 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," Gopalan had told reporters in Chennai.

In a recent report on MFIs, brokerage house Indiabulls Securities had said that the business of MFIs was likely to come under regulatory or judicial intervention, considering the socio-political sensitivity to rural lending.

A short time ago, 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 the rural areas are much higher.