SKS Microfinance to explore banks for funds

MUMBAI: SKS Microfinance today said it will raise additional funds from banks, a move likely to help it tide over liquidity shortage.

"The Board of the Company...decided against CDR route, instead will explore other possibilities of additional fund raising from various banks/financial institutions," SKS Microfinance said in a filing to the Bombay Stock Exchange (BSE).

The Board has decided against going for Corporate Debt Restructuring (CDR) route, it said.

Several banks are believed to have approached the CDR cell of RBI to restructure loans advanced by them to Micro Finance Institutions (MFIs).

Some major banks such as State Bank of India , ICICI Bank and Axis Bank are estimated to have lent over Rs 15,000 crore to MFIs. ICICI has lent around Rs 2,000 crore, SBI Rs 1,000 crore, while Small Industries Development Bank of India (SIDBI) has MFIs exposure to about Rs 4,000 crore.

The Reserve Bank had in January relaxed the debt restructuring norms for the micro finance sector to enable banks to provide liquidity support to the crisis-ridden MFIs.

With the clamp down on bank loans to MFIs, the business of these companies has slowed down considerably since October last year when a string of farmer suicide cases in Andhra Pradesh led to the introduction of an ordinance to regulate the MFIs' operations in the state.

The ordinance is now passed into an Act. SKS with over 2,400 branches has more than 77 lakh members. As on December 31, 2010 amount disbursed by SKS stood at Rs 21,431 crore.