The Insurance Regulatory and Development Authority (IRDA) has slapped a Rs 50-lakh penalty on SKS Microfinance Ltd, in perhaps the highest-ever penalty imposed so far.
The only-listed microfinance institution in the country was fined for making unauthorised changes in the benefits of policies of its clients while acting as a group policyholder or administrator.
The company had recovered advances extended towards funeral costs to the nominee of the deceased member which was later recovered illegally from the claim amounts paid by the insurer.
“The MFI has (also) levied a charge higher than the premium in violation of rules,” IRDA Chairman J. Hari Narayan said in the order hosted on its Web site on Wednesday.
SKS had generated ‘substantial’ amount of income under group insurance administrative charges by levying higher charges than usual, IRDA said.
The MFI, which was hit hard by AP Microfinance crisis, had illegally recovered outstanding loans from the death claim benefits of clients which were to be received by their nominees.
There was undue delay of at least 45 days between the actual date of collection of the premium and its conversion into group insurance policy.
This allowed SKS to use the money for short-term liquidity/investment needs while causing loss of coverage to the clients. The lapses were found in SKS’ insurance dealings for clients with LIC of India, Bajaj Allianz Life Insurance and ING Vysya during 2009-10 and 2010-11.
SKS scrip gained 1.35 pc to end at Rs 146.70 on the BSE on Wednesday.