Udaia Kumar, the managing director of SHARE Microfin Limited, a non-banking financial institution in India, was reportedly paid a salary of INR 74 million (USD 1.6 million) for the fiscal year ending March 2010. The salary exceeds the limit stipulated by the Companies Act, a law which regulates the operations of firms in India. The act states that a company is not allowed to pay more than 5 percent of its net profit to a director without government permission. A significant portion of Mr Kumar’s salary comprises “sweat equity”, which are shares issued at zero cost to the recipient [1]. The 2008-2009 salary of Mr Kumar of INR 81 million (USD 1.7 million) also exceeded the limit set by the Companies Act, but Share Microfin obtained approval from the Ministry of Corporate Affairs for the surplus pay.
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MICROCAPITAL BRIEF: responsAbility Social Investments of Switzerland Loans $11m to Indian Microfinance Institutions via UTI Fund
responsAbility Social Investments AG, an investment company based in Switzerland, recently reported to MicroCapital that it invested approximately USD 11 million in an unspecified Indian money market fund via the UTI Wealth Creator 4 fund, which is organized under UTI International Limited, a subsidiary of UTI Asset Management Company of India.
MICROCAPITAL BRIEF: Reserve Bank of India (RBI) Proposal A Positive Step, Argues Tripathi… But Andhra Pradesh Government Oversteps
Salil Tripathi, director of policy at the British nonprofit Institute for Human Rights and Business, argues through the “Poverty matters blog” on the website of the UK’s Guardian newspaper that, while recent Reserve Bank of India (RBI) regulation is a positive step for the future of microfinance, the legislation passed by the state government of Andhra Pradesh reflects a monopolistic tendency. Mr Tripathi states that the move by local officials favors its own lending activities through self-help groups (SHGs) while it restricts the role of the private sector. On the other hand, he argues that the regulation suggested by RBI, while reducing choice and access to finance for the poor to a certain extent, is actually intended to protect the interests of the poorest [1].
MICROCAPITAL BRIEF: MicroSave’s India Focus Notes Examines Microfinance Turmoil in Andhra Pradesh
MicroSave, a private consulting company that provides technical assistance to microfinance institutions (MFIs), recently published a series of papers that examine the trouble that has arisen in microfinance in the Indian state of Andhra Pradesh since late 2010.
MICROCAPITAL BRIEF: SKS Microfinance of India Increases Loan Loss Provision, Reports 38% Fall in Quarterly Net Profit
SKS Microfinance, a for-profit, publicly traded microfinance institution (MFI) based in India, recently reported total income of INR 3.85 billion (USD 83.8 million) and a 38 percent drop in net profit to INR 341 million (USD 7.4 million) for the period October-December 2010. A 30-percent fall in the share price of SKS has also been recorded since October 2010 [1].
MICROCAPITAL BRIEF: Equitas Microfinance of India to Reduce Loan Portfolio to $187m by March 2011
Equitas Microfinance, a microfinance institution (MFI) that was established in Chennai, India, in 2007, recently announced plans to reduce its loan portfolio from INR 9.5 billion (USD 210 million) to INR 8.5 billion (USD 187 million) by its fiscal yearend of March 2011.
MICROCAPITAL BRIEF: Reserve Bank of India (RBI) Relaxes Rules in Effort to Ease Microfinance Institution (MFI) Liquidity Crunch
The Reserve Bank of India (RBI), India’s central banking authority, has temporarily relaxed asset classification rules for bank loans to the microfinance sector, allowing commercial banks to classify loans made to microfinance institutions (MFIs) as standard assets. Under the standard guidelines, banks had to classify loans made to MFIs as unsecured assets, which required a higher minimum provision than do standard assets [1].
MICROCAPITAL BRIEF: State Bank of India, ICICI Bank Partnering With Mobile Providers Bharti Airtel, Vodafone Essar to Expand Banking Options
Indian mobile service provider Vodafone Essar will become a business correspondent of ICICI Bank, while competitor Bharti Airtel has announced a joint venture with the State Bank of India (SBI).
MICROCAPITAL BRIEF: Government of India’s Andhra Pradesh Considers Requiring Microfinance Institutions (MFIs) to Compensate Families of Suicide Victims
The government of the Indian state of Andhra Pradesh (AP) is considering a bill that would make it compulsory for microfinance institutions (MFIs) to compensate the families of borrowers who commit suicide as a result of heavy debt burdens.
MICROCAPITAL BRIEF: Microfinance Institutions Network (MFIN) of India to Investigate Claims of Improper Handling of Mutual Benefit Trusts (MBTs) by SKS Microfinance, SHARE Microfin and Spandana Sphoorty
The Microfinance Institutions Network (MFIN), a trade association of Indian microfinance lenders, has set up a committee to investigate claims that SKS Microfinance, a for-profit microfinance institution (MFI); SHARE Microfin, a regulated non-banking finance company (NBFC); and Spandana Sphoorty, another for-profit MFI, took advantage of clients through the use of mutual benefit trusts (MBTs) to converting the institutions into for-profit entities.
MICROCAPITAL BRIEF: MFTransparency Launches Pricing Data Report on India’s Microfinance Industry
MFTransparency, a US-based nongovernmental organization that aims to provide information on credit products and pricing in a clear and uniform fashion, recently released the pricing data report of its Transparent Pricing Initiative in India.
MICROCAPITAL BRIEF: Indian Bank Receives Skoch Financial Inclusion Award 2011 for “Self-Help Group (SHG) Initiatives – Urban Financial Inclusion”
Skoch Consultancy Services Private Limited, a strategic planning and management consulting firm based in India, has presented Indian Bank, a bank owned by the government of India, with the Skoch Financial Inclusion Award 2011 for its work serving self-help groups (SHGs) in urban areas.
MICROCAPITAL BRIEF: Indian Rating Agencies, ICRA and Credit Rating and Information Services of India Limited (CRISIL), Predict Microfinance Institution (MFI) Consolidation Would Result From Reserve Bank of India (RBI) Proposals
According to Indian rating agencies Credit Rating and Information Services of India Limited (CRISIL) and ICRA Limited (formerly Investment Information and Credit Rating Agency of India), a recent proposal by the Reserve Bank of India (RBI), India’s central banking authority, to regulate the country’s microfinance industry will result in slower growth and smaller profits for microfinance institutions (MFIs) that will lead to a consolidation in the sector.
MICROCAPITAL BRIEF: International Finance Corporation (IFC) Invests $35m in Equity of Indian Microfinance Institution (MFI) Bandhan Financial Services
The International Finance Corporation (IFC), the investment arm of the World Bank Group, a multilateral development finance organization based in Washington DC, will make an INR 1.6 billion (USD 35.1 million) equity investment in Bandhan Financial Services, a microfinance institution (MFI) based in Kolkata, India, to expand its operations in the country. The deal is reportedly the largest equity investment in an Indian MFI since the turmoil in the microfinance industry in Andhra Pradesh began in late 2010.
MICROCAPITAL BRIEF: Reserve Bank of India (RBI) Subcommittee Proposes Regulation for Microfinance Institutions (MFI)
A committee headed by Y H Malegam, central board director of the Reserve Bank of India (RBI), India’s central banking authority, met last week and proposed that microfinance institutions (MFIs) should be allowed to charge a maximum interest rate of 24 percent to borrowers and that loans to a single microborrower should not exceed INR 25,000 (USD 548).
MICROCAPITAL BRIEF: Retail Microfinance Institution (MFI) Loans Taking Two Months to Process in Andhra Pradesh, India
Since the state government of Andhra Pradesh implemented a law in October 2010 that requires microfinance institutions (MFIs) to get approval from district officials before disbursing loans, it now reportedly takes approximately two months to process loans.
MICROCAPITAL BRIEF: India’s National Bank for Agriculture and Rural Development (NABARD) Looking to Invest in Venture Capital Funds
The National Bank for Agriculture and Rural Development (NABARD) of India, which regulates and promotes microfinance activities in rural areas, recently announced that it is interested in investing in venture capital funds.
MICROCAPITAL BRIEF: SKS Microfinance Announces Interest Rate Slash in India
SKS Microfinance, a for-profit microfinance institution (MFI) in India, has announced a universal cut in “effective” interest rates charged to microfinance borrowers from 26.7 percent to 24.6 percent.