The Andhra Pradesh Government has cancelled the registration of SKS Microfinance to conduct business in Mahabubnagar District in the state for not following rules.
According to a letter issued by the District Rural Development Agency (DRDA) to India’s only listed micro lender, the agents of the company visited individual houses for collection in violation of Andhra Pradesh Microfinance Institutions (Regulation of Money Lending) Act, 2010.
“Since SKS Microfinance has violated the conditions of MFI Act, the registration is hereby cancelled with immediate effect and SKS Microfinance is prohibited from conducting financial activities in Mahbubnagar District,” the state government order said.
A senior official of SKF Microfinance has confirmed that a petition has been filed against DRDA order in court.
The DRDA had issued a show cause notice to the company and the reply was not ‘satisfactory and true’, it said.
“The agents who visited the houses of loanees in the district were other than the notified agents... collecting money from door to door is gross violation of MFI Act,” the order said.
When contacted, an SKS spokesperson said, “We have been working closely with the authorities concerned to bring normalcy to the business in Andhra Pradesh. We are hopeful of an early solution. We have initiated the process for contesting the order in a court of law.”
The operations of the company in AP were severely constrained after the promulgation of the AP MFI Act, the spokesperson added.
A case is pending in the Andhra Pradesh High Court, seeking certain reliefs in order to resume lending operations in the state, the spokesperson said.
According to the beleaguered MFI, virtually no disbursals are happening after the AP MFI Ordinance was promulgated in October 2010 not just in Mahbubnagar district but whole of AP.
The company brought down its exposure in the State to Rs 236 crore from a high of Rs 1,491 crore in October 2010 by writing off Rs 272 crore in the fourth quarter of FY12 and about Rs 900 crore in the earlier quarters.
It incurred a loss of Rs 1,360 crore during the year ending March 2012 primarily on account of situation in AP.
SKS had earlier said it is facing collection problem in three Districts of West Bengal.