SKS cuts interest rate on micro loans
SKS cuts interest rate on micro loans. SKS Microfinance Limited on Thursday announced a 1.55 per cent reduction in the interest rate charged to borrowers from 23.55 per cent to 22 per cent with effect from July 1, 2015.
Reduces by 1.55% to 22% which is said to be lowest among all MFIs
The announcement is a part of the company’s policy of passing on the cost advantages accruing from reduction in the cost of borrowing, economies of scale and operational efficiency to its borrowers
Hyderabad: SKS Microfinance Limited on Thursday announced a 1.55 per cent reduction in the interest rate charged to borrowers from 23.55 per cent to 22 per cent with effect from July 1, 2015. This is the second interest rate reduction from the Company since October 2014, when it slashed interest rate by one per cent.
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With the present reduction, SKS Microfinance charges the lowest rate among Non-Banking Financial Company - Micro Finance Institutions (NBFC-MFIs) on its core income generating loans (IGL) which are unsecured micro loans.“The announcement is consistent with the company’s policy of passing on the cost advantages accruing from reduction in the cost of borrowing, economies of scale and operational efficiency to its borrowers,” the company said.
SKS Microfinance could reduce its cost of interest-bearing liabilities to 11.8 per cent in Q4-FY15 from 13.6 per cent in FY14 on account of downward adjustments in risk premium. The company’s sustained turnaround, improved profitability in FY15, capital raise in May 2014, rating upgrade and issuance of commercial papers and non-convertible debentures are the factors that drove the reduction in its cost of borrowing, it added.
The micro lender has a short-term credit rating of ‘A1+’ and a long-term rating of ‘A+’. Creditor confidence in SKS Microfinance has also been boosted by the company’s spotless repayment track record. “During the most difficult Andhra Pradesh microfinance crisis, the company did not join corporate debt restructuring (CDR) and met all its financial obligations - amounting to Rs 5,800 crore - to the banking system without any hair-cut or rescheduling,” the company maintained.
SKS Microfinance’s strong net worth of Rs 1,046 crore and capital adequacy ratio (CAR)of 31.7 per cent, well in excess of the mandated 15 per cent, are also said to have enhanced the credit quality of the company’s papers, and helping it obtain competitive pricing. The company is among the largest microfinance institutions in India with presence across 17 states covering 1, 00,000 villages.
