SKS Microfin expects to recover written-off loans in Andhra

The company is now awaiting to receive the copy of the interim order so as to resume its operations in AP

SKS Microfinance, the only listed microfinance institution (MFI) in India, expects to recover most of the Rs 1,350 crore of debt it had written off in Andhra Pradesh.

“The entire amount to be recovered from Andhra Pradesh will go to the bottom line of the company’s balance sheet, substantially enhancing the company’s net profit this financial year,” a source told Business Standard.

Yesterday, the Supreme Court had issued an interim order, allowing SKS to resume microlending operations in Andhra Pradesh without securing a no-objection certificate from the state government.

Senior SKS executives refused to comment, saying they were yet to receive a copy of the court’s order.

The court, however, said SKS shouldn’t resort to coercive recovery practices and the interest payable shouldn’t exceed the principal.

Sources said the court’s concerns had already been addressed by the Reserve Bank of India (RBI).

Besides fixing a cap of 26 per cent on the interest, RBI had imposed an individual borrowing limit of Rs 50,000.

To curb questionable recovery practices, the central bank had stipulated that all dealings with customers be conducted at public places.

After the state government introduced the Andhra Pradesh Micro Finance Institution (Regulation of Money Lending) Ordinance 2010, MFI operations in the state, by and large, came to a standstill.

The ordinance, subsequently enacted as law, was aimed at curbing alleged questionable lending and recovery practices.

After the ordinance was introduced, most MFIs in the state plunged into losses. SKS was the worst-hit.