SKS Microfinance Limited on Friday announced a 1 per cent reduction in the interest rate charged to borrowers from 20.75 per cent to 19.75 per cent with effect from December 7, 2015, for all future disbursals. This is the fourth interest rate reduction, aggregating 4.8%, by the company since October 2014.
With this interest rate reduction, SKS Microfinance becomes the first microfinance institution to charge sub-20% interest rate on its core Income Generating Loans (IGL) which are unsecured micro loans. Interest rate of 19.75% is the lowest rate charged by any private sector MFI in the world.
“SKS Microfinance Limited could reduce its marginal cost of borrowing to 11.3% in Q2-FY16 from 13.6% in FY14 on account of downward adjustments in risk premium. Marginal cost of borrowing for H2-FY16 is expected to be lower than 11.3% given the Company has accessed refinance from MUDRA at 10% and issued commercial papers at 9.5% per annum in October and November 2015,” the company said in a BSE filing.
The company has a short-term credit rating of ‘A1+’ and a long-term rating of ‘A+’. In Q2-FY16, SKS Microfinance Limited’s gross loan portfolio has surpassed the past peak of Rs 5,434 crore (in Q2-FY11), thanks to the Company’s consistent annual growth of around 50%. Also, the Company registered a 5.3% quarter-on-quarter drop in cost to income to 47% in Q2-FY16 from 52.3% in Q1-FY16.
As of September 30, 2015, SKS Microfinance Limited had a net worth of Rs 1,203 crore and a capital adequacy of 24.6%. Cash and cash equivalents stood at Rs 834 crore.
At 9.43 am, SKS Microfinance was trading 4.67 per cent up at Rs 443.80.
