SKS Micro may approach RBI for banking licence
SKS Microfinance, which is passing through rough weathers, may approach the Reserve Bank of India (RBI) for a banking licence.india Updated: Sep 04, 2011 21:16 IST
SKS Microfinance, which is passing through rough weathers, may approach the Reserve Bank of India (RBI) for a banking licence.
"Finer details are being worked out and (SKS Microfinance) may approach the RBI for licence after approval from the board of directors," a source said.
MR Rao, CEO and managing director, SKS Microfinance, said the company does not see any major issue in meeting the eligibility criteria set by the RBI.
"Our net worth is Rs 1,563 crore and we are already meeting the capitalisation norm. The draft guidelines stipulate that 25% of the branches should be located in rural/unbanked areas. Around 90% of our branches will qualify for the same," he said. Besides, the composition of the board also meets the eligibility criteria with 50% of the positions being held by independent directors.
"Most importantly, as a bank you have funding capability and access to low-cost funds, which will help reduce interest rates for borrowers. Of course, the operating cost and compliance cost could increase," said Rao.
SKS Microfinance, hit by the introduction of the Andra Pradesh government's Microfinance Act last year, has Rs 1,135 crore of outstanding loan amount in the state, thereby putting pressure on the company's financials.
The provisions in the Andhra Pradesh MFI Act have hampered its growth in the state, resulting in a 5% reduction in the company's overall loan portfolio, said Vikram Akula, chairman, in the annual report.
Analysts, however, feel that the RBI will have to check the financial stability of the company before taking a decision. "The RBI will have to check the financial stability of the company after the huge losses they declared in terms of write offs and provisions," said Vaibhav Agrawal, banking head, Angel Broking.