Now IRDA probes SKS Microfinance

SKS Microfinance, the largest listed microfinance company in India, is caught in yet another regulatory trouble — this time, it’s on the radar of the Insurance Regulatory Authority of India (IRDA).

SKS is being investigated for deviating from the guidelines set by the IRDA on commissions and claim settlements, two sources familiar with the development said.

SKS, while insuring its clients, allegedly collected more commission than the prescribed 10% for agents and is also said to be under scanner for not depositing the monies collected towards policies with the insurer.

SKS deals with the Life Insurance Corporation of India and Bajaj Allianz for marketing policies.

Additionally, IRDA is also said to be verifying the allegations of the company accepting claim cheques in its own name and not that of the beneficiary.

An SKS spokesperson said, “IRDA officials visited our office almost a month ago and they verified some documents. We have not received any further communication from them on this”.    

Deviations by the company in the insurance segment are also being examined by the state government, which had asked its officers to collect information on microfinance institutions operating in the state following the promulgation of the ordinance to discipline the rogue entities.

Sources said Irda is particularly examining deviations by SKS when selling insurance policies to clients.

SKS has been facing a slew of hurdles, particularly in Andhra Pradesh, in conducting its business.

The state, where SKS gets 27% of its business from, promulgated an ordinance making it mandatory for all microfinanciers including SKS to register with the authorities before carrying out their regular business.

Though the Andhra Pradesh high court subsequently allowed the companies to do their business while complying with the ordinance without having to wait for the registration before going out to the market, SKS was hit because recoveries have not happening on schedule.

Additionally, the interference of various political parties encouraging microfinance borrowers to stop repaying their loans added another blow.