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SKS says will cut rates to 24% across states.

SKS MICROFINANCE, the largest microfinance institution ( MFI) in the country, said on Tuesday that it is planning to cut its lending rate to 24 per cent across all states in due course.

" In Andhra Pradesh ( AP), the company has already reduced the interest rates to effectively 24.55 per cent and shall take steps to further reduce it to effectively 24 per cent.

The company is also planning to reduce interest rates in other states to effectively 24 per cent in due course," said the MFI in a notification to the stock exchanges.

MFIs typically lend to tiny or household businesses that have no access to bank loans. They charged effective rates of 28- 32 per cent a year, which were more than double the then- prevailing bank lending rates.

The decision by SKS to cut rates comes at a time the state government of AP had bought MFIs under its regulation and reined them in from using force to collect loan dues, which allegedly resulted in suicides of some borrowers.

The latest move is in line with the decision of the Microfinance Institution Network ( MFIN), association of MFIs, following the concerns expressed by the AP government.

Last month, SKS had cut its lending rates to 24.55 per cent from 26.69 per cent in AP. In the update on the operations in AP, the MFI said, " The ordinance and its implementation will have material impact on the company's operations in AP." After the AP High Court's interim order on October 22, 2010 permitting MFIs to carry on their business, SKS could not hold village- centre meetings in 54 per cent of the centres in the state for the week ended October 29, 2010, mainly due to lack of legal and political support, it said.

SKS expects to start extending loans again once additional details are provided to complete registration requirements and once it has adapted its systems to accommodate monthly repayments. The MFI was following a weekly repayment pattern till recently. The company has also applied for registration with 44 registering authorities and received 33 provisional certificates from them.

It said so far it has not seen the spread of the scepticism that prevailed in AP to other states, considering weekly meetings were being held as per schedule and repayments were at a historical average of 99 per cent.

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Publication:Mail Today (New Delhi, India)
Geographic Code:9INDI
Date:Nov 10, 2010
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