Nov. 25: There seems to be no respite for SKS Microfinance, which has now come under insurance regulator IRDA’s scanner for violating norms in selling insurance policies to its borrowers.
Sources said the country’s only listed micro finance company SKS Microfinance is under the scanner of the Insurance Regulatory and Development Authority (IRDA) for charging higher commission on sale of insurance policies.
They said SKS had collected commissions higher than the 10 per cent permitted for an agent while selling policies. There have also been reports that SKS had received cheques for death claims on its name. Under the normal practice, the cheque is issued in beneficiary’s name. When contacted IRDA chairman, Mr J. Hari Narayan, said “We are still examining the records (of SKS). Investigation is going on.”
A spokesperson of SKS said, “The IRDA people came to examine records a month ago. But they have not issued any notice thereafter.” For over a month now, SKS Microfinance is embroiled in a controversy for sacking of its chief executive, Mr Suresh Gurumani. Lending by microfinance companies had come to a near halt in Andhra Pradesh after the local government introduced new rules in mid-October aimed at protecting borrowers, leading to debt collections plummeting below 20 per cent.
Recently, MFIs were also under Crisil’s radar last week when it had placed debt instruments of SKS Microfinance under ratings watch. This could adversely impact SKS’s future gradings. SKS Microfinance came into focus after stating that its collections from Andhra Pradesh for November has been below normal and a continuation of the situation would impact the future profitability. It, however, changed track a day later and said its strong balance sheet will help it weather the crisis of business slowdown faced by the sector after the Andhra Pradesh ordinance. Since MFIs do not have direct access to deposits, they take loans from banks and others to re-lend them to those in the unorganised sector.