SKS Microfinance Limited (SKS), a non-banking finance company (NBFC) regulated by the Reserve Bank of India (RBI), reportedly will terminate 1,200 of 3,400 jobs and shutdown 78 branches in the state of Andhra Pradesh. The company has lost INR 1,120 crore (USD 208 million) since the Andhra Pradesh downturn, which has been blamed for the default of approximately 9.2 million of 32 million Indian microfinance clients since 2010.
According to 2011 data from the US-based nonprofit Microfinance Information Exchange (MIX), SKS Microfinance holds total assets of USD 389 million, a gross loan portfolio of USD 341 million, approximately 4.3 million borrowers, return on assets (ROA) of -66.1 percent and return on equity (ROE) of -152 percent. SKS has raised approximately INR 918 crore (USD 181 million) through securitization deals since January 2012.
By Brendan Millan, Research Associate
About SKS Microfinance: SKS Microfinance is a microfinance institution (MFI) that was launched in 1998. It delivers gold loans and group microloans inIndiaas a for-profit, non-banking finance company. SKS converted into a public limited company in May 2009 and launched an initial public offering on July 28, 2010. Its equity investors include Quantum Hedge Fund, Sequoia Capital, Vinod Khosla, Small Industries Development Bank of India, Bajaj Allianz, Yatish Trading, Kismet Capital, Sandstone Capital, Silicon Valley Bank and Unitus. SKS currently trades on the Bombay Stock Exchange. According to 2011 data from the US-based nonprofit Microfinance Information Exchange (MIX), SKS Microfinance holds total assets of USD 389 million, a gross loan portfolio of USD 341 million, approximately 4.3 million borrowers, return on assets (ROA) of -66.1 percent and return on equity (ROE) of -152 percent.
About the Reserve Bank of India (RBI): Established in 1935, the Reserve Bank of India (RBI) undertakes consolidated supervision of the financial sector comprising commercial banks, financial institutions and non-banking finance companies (NFBCs). The current focus of RBI is to supervise financial institutions, consolidate accounting standards, resolve legal issues in cases of banking fraud, monitor non-performing assets and supervise the rating model for the banking sector. In 1979, the National Bank for Agriculture and Rural Development (NABARD) was formed at the behest of RBI to provide regulatory oversight to regional rural banks (RRBs) and to promote the development of agricultural lenders: tasks that had been the responsibility of RBI. While all microfinance institutions (MFIs) and non-banking financial companies still operate under RBI regulations, the responsibility for inspecting nonprofit MFIs, agricultural lenders, RRBs, state cooperative banks, district central cooperative banks and state cooperative agricultural and rural development banks was transferred to NABARD. RBI maintains these responsibilities for for-profit MFIs. Although RBI was originally the parent organization of NABARD and until October 2010 held a 72.5 percent stake in the outfit, RBI owns a one-percent stake in NABARD as of 2011.
Sources and Resources:
 The Times of India: “SKS Microfinance Cuts 1,200 Jobs in Andhra Pradesh”, http://timesofindia.indiatimes.com/business/india-business/SKS-Microfinance-cuts-1200-jobs-in-Andhra-Pradesh/articleshow/13083157.cms
MicroCapital.org story, April 4, 2012, “MICROCAPITAL BRIEF: Indian Microfinance Sector Cautious on Branch Expansion, Hiring”, http://www.microcapital.org/microcapital-brief-indian-microfinance-sector-cautious-on-branch-expansion-hiring/
MicroCapital story, March 27, 2012, “MICROCAPITAL BRIEF: 9.2m Microfinance Borrowers in IndiaHave Defaulted Since 2010”, http://www.microcapital.org/microcapital-brief-9-2m-microfinance-borrowers-in-india-have-defaulted-since-2010/
MicroCapital story, March 13, 2012, “MICROCAPITAL BRIEF: Small Industries Development Bank of India (SIDBI) Requires SKS Microfinance to Lend Only Outside Andhra Pradesh”, http://www.microcapital.org/microcapital-brief-small-industries-development-bank-of-india-sidbi-requires-sks-microfinance-to-lend-only-outside-andhra-pradesh/
MicroCapital story, February 28, 2012, “MICROCAPITAL BRIEF: 76 Criminal Cases Pending Over Alleged Role of Microlenders in Borrower Suicides in India’s Andhra Pradesh”, http://www.microcapital.org/microcapital-brief-76-criminal-cases-pending-over-alleged-role-of-microlenders-in-borrower-suicides-in-indias-andhra-pradesh/
MicroCapital story, February 27, 2012, “MICROCAPITAL BRIEF: Internal Documents Collected by Associated Press Implicate SKS Microfinance Staff in Borrower Suicides in Andhra Pradesh, India”, http://www.microcapital.org/microcapital-brief-internal-documents-collected-by-associated-press-implicate-sks-microfinance-staff-in-borrower-suicides-in-andhra-pradesh-india/
MicroCapital Universe Profile: SKS Microfinance (SKS), http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=SKS+Microfinance
MicroCapital Universe Profile: Reserve Bank of India (RBI), http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Reserve+Bank+of+India+%28RBI%29
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