Fate of SKS loans still hangs in balance

The cup of woes is flowing over for SKS Microfinance in its key market Andhra Pradesh.

The company can’t step into the market for recovering the loans it has already given out. And with the market out of bounds, it can’t give out new loans either.

Going by sources, the unrecovered loans are anywhere between Rs50 crore and Rs75 crore. The fate of these loans is unclear as the borrowers were never against repaying and it was the company that did not send its agents out into the market due to the ordinance promulgated by the state government to check microfinance institutions (MFIs).

“Recovery of the pending repayments is going to be a major issue for the MFIs, more so for SKS. It was government action that kept the company out of the market and now, for the borrowers, repaying the entire money would be extremely difficult,” a source tracking the company said.

The company has an exposure of about Rs1,400 crore in Andhra Pradesh and recovers about Rs 28 crore every week. It follows a weekly repayment schedule and recovers its money over a period of 50 weeks.

“The company is not seen in about 60% of its market in AP due to fears of physical attacks on its agents. Even after the high court of AP allowed the MFIs to go ahead and do business pending a final judgment on the validity of the ordinance, SKS is definitely ahead of the pack in facing public wrath,” the source said.

The company, however, believes the situation is improving and that it would be able to recover its loans as the situation on the ground reaches normalcy.

“In Andhra Pradesh, we are going into all those markets where we are allowed to go. It is a fact that we are not being allowed to enter all the markets due to various reasons. But, things are improving,” a company spokesman said.

According to him, the company has complied with the mandatory registration of all its operations as required by the state government and filed for completing the process.