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About 80 per cent of fresh-loan applications of microfinance institutions (MFIs) in Andhra Pradesh have existing multiple loans ranging from four to 12, even though the A.P. MFI Regulation Act prohibits lending of fresh loans to people with existing loans.
And the country's only listed MFI, SKS Microfinance Ltd, is in for fresh trouble as the Government is set to reject a majority of loan proposals it has submitted for clearance.
For instance, SKS Micro had sent a proposal to the Government to sanction a fresh loan to Ms Vaara Satyavathi of Sitanagaram village in West Godavari District, A.P.
As per the data shown by the newly set up Government-run credit bureau, she has seven existing MFI loans, including three from SKS itself. Share Microfin had given her two while Spandana Spoorthy had one loan.
This is in addition to another loan she had under the SHG-bank linkage programme. This is not an isolated case. “Roughly 80 per cent of applications for fresh loans are for households which already have multiple subsisting loans,'' Mr Reddy Subrahmanyam, Principal Secretary, Department of Rural Development, A.P., told Business Line .
Almost all applications for fresh loans came from SKS, he added. SKS had so far submitted 89,000 applications for fresh loans.
All these applications would have to be rejected as the A.P. MFI Regulation Act prohibits lending of fresh loans to people with existing loans, he added.
TROUBLE FOR SKS
Under these circumstances, SKS Micro may find it difficult to sanction new loans in the State. Till October 2010, A.P. had accounted for over 25 per cent of SKS' outstanding loan portfolio of about Rs 5,400 crore.
The weekly collections were at Rs 28 crore. However, the disbursals as well as collections came to a standstill since then due to the uproar over alleged ‘excesses' of MFIs for recovery and the regulation put in place by the Government subsequently.
When contacted, Mr M. R. Rao, Chief Executive Officer of SKS Microfinance Ltd, said on Wednesday that the applications were filed on the ‘face value' of the applicants as it would not know the applicants' dealings/outstanding loans with other companies.
“We have obtained approvals for 1,400 fresh loans,'' he added.
But, according to credit bureau data, many of SKS loan applications also emanated from it own clients with two/three loans.
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