SKS Microfinance Limited today announced a 1.25% reductionin the interest rate charged to borrowers from 22% to 20.75% with effect fromOctober 1, 2015, for all future disbursals.
With the third interest rate cut and an overall reduction of 3.8% since October 2014, SKS Microfinance Limited now charges what is considered the lowest rate among globalMicro Finance Institutions on its core Income Generating Loans (IGL) which are unsecured micro loans. It had been charging the lowest interest among Indian MFIs since July2015 with a reduction of 1.55% in that month, in addition to the 1% reduction in October 2014.
The reductions are consistent with the Company policy of passing on the cost advantages accruing from reduction in the cost of borrowing, economies of scale and operational efficiency, to its borrowers. SKS Microfinance Limited could reduce its cost of interest-bearing liabilities to 11.9% in Q1-FY16 from 13.6% in FY14 on account of downward adjustments in risk premium.
TheCompany sustained turnaround, improved profitability in FY15 and Q1-FY16, capital raise in May 2014, rating upgrade and issuance of Commercial Papers and Non-Convertible Debentures are the factors that drove the reduction in its cost of borrowing. The Company has a short-term credit rating of A1+; and a long-term rating of A+;. Creditor confidence in SKS Microfinance Limited has also been boosted by the Company spotless repayment track record. During the most difficult Andhra Pradeshmicrofinance situation, the Company did not join Corporate Debt Restructuring (CDR) and met all its financial obligations — amounting to Rs. 5,800 crore — to the bankingsystem without any hair-cut or rescheduling.
SKS Microfinance Limited strong net worth of Rs. 1,115 crore and Capital Adequacy Ratio of 27.2%, well in excess of the mandated 15%, also enhance the credit quality ofthe Company papers, and help it obtain competitive pricing.
About SKS Microfinance Limited:
SKS Microfinance Limited is among the largest microfinance companies in India with presence across 18 states covering 1, 00,000 villages. The states include: AndhraPradesh, Telangana, Karnataka, Maharashtra, Odisha, Madhya Pradesh, Bihar, Uttar Pradesh, Rajasthan,Uttaranchal,Haryana,WestBengal,Jharkhand,Chhattisgarh,KeralaPunjab,HimachalPradesh and Delhi. The Company mission is to provide financial services to the economically weaker sections.