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SKS Microfinance cuts jobs, shuts branches in Andhra Pradesh

HYDERABAD/MUMBAI: Even as it packs bags to shift base to Mumbai, beleaguered microfinance player SKS Microfinance is wielding the hatchet. India’s only listed microfinance institution (MFI) on Thursday axed 1,200 jobs and shut 78 branches in Andhra Pradesh amid howls of employee protests.

The company’s employee count in Andhra Pradesh dropped by more than one-third (from 3,400 to 2,200) after today’s layoffs and the number of branches in state will shrink from 180 to 102.

SKS unveiled the move even as the Union cabinet on Thursday approved the long awaited Microfinance Bill, which brings MFIs under regulatory jurisdiction of RBI and overrides the existing state legislations, such as the one passed by Andhra Pradesh government in 2010.

The company’s operations in Andhra – a pioneering market for microfinance in India – struggled after the state regulations stipulated stringent procedures in lending to the borrowers, mostly poor, in the semi-urban and rural pockets. The ordinance also made it mandatory for people to borrow from only one MFI.

The Andhra Pradesh legislation triggered a crisis in the sector as about a quarter of the total assets of the microfinance industry is concentrated in the state. SKS reported a loss of Rs 1,360 crore in FY12, mostly due to the Andhra woes.

SKS has been has been slashing manpower ever since the Andhra crisis struck the sector 18 months ago, with its staff numbers coming down from 25,735 to just about 16,194 employees in march 2012. Its borrower base dwindled from around 7.8 million before the crisis to around 5.3 million borrowers as of March 2012.

SKS shares have lost 94% value after hitting a peak of Rs 1,491 in September 2010.

SKS Microfinance managing director and CEO M R Rao said the latest rationalization exercise is not a closure of its AP operations: “Closing down branches and reducing headcount are extremely painful decisions for us but these have become urgent in view of the present financial situation,” he said, while acknowledging “the invaluable contributions made by our colleagues in Andhra Pradesh in shaping the company as one of the largest microfinance companies”.

He pointed out that the company had reduced its residual AP exposure to Rs 236 crore from a high of Rs 1,491 crore in October 2010 by writing off Rs 1,120 crore, on account of the situationprevailing in Andhra.

“The operations in 17 other states have been subsidizing the Andhra operations for a good 18 months. Going forward, in view of the present financial situation, it is imperative that Andhra operations remain cash neutral in the interest of fairness to all stakeholders. Also bank funding is restricted to operations in other states,” Rao said.

Short URL: http://www.cckerala.com/?p=9812

Posted by on May 11 2012. Filed under Business India News. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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