Posted on December 22, 2009 - by James

India: SKS Microfinance ties up with State Bank of India…

SKS Microfinance has tied up with State Bank of India and two of its group banks for integration of 600 of its branch accounts with them.

“This is an innovation on the liability side we are offering to our customers. It will facilitate last mile cash-dealing,” Mr Dilli Raj, Chief Financial Officer, SKS Microfinance, told Business Line here.

As a part of the agreement, the Hyderabad-based microfinance institution would integrate its accounts in 390 branches with State Bank of India, 150 with State Bank of Hyderabad and 60 with State Bank of Mysore.

SKS had earlier tied up with Axis Bank, HDFC Bank (NYSE:HDB) and ICICI Bank (NYSE:IBN) for a similar facility.

“In addition, State Bank of India is also giving us Rs 100 crore funds as a mix of term loan and cash credit. This is significant because it shows the willingness of public sector banks to be associated with MFIs which was not happening earlier,” he said.

SKS, which has an outstanding portfolio of Rs 3,628 crore as on November 30, 2009, now had 36 per cent of its credit sources coming from 17 public sector banks.

CAPITAL

On the need for further capital, Mr Raj said evaluation of all possible options in debt and equity (including IPO) was being examined.
SKS has been aggressive on securitization of its agri/weaker section portfolio with banks. “Before March 31, 2010, we will be doing Rs 1200 crore through this route as the funds would be cheaper by 200 to 250 basis points than the term loans (at about 8.25 per cent), he said.

So far, it had tied up with ICICI Bank, HDFC Bank, Axis Bank, Kotak Mahindra, Punjab National Bank and Yes Bank (OOTC:YESBF) in this regard.

The benefit in the cost of funds would eventually be passed on to the 5.7 million customers SKS currently had, the CFO said.

“In fact, we have reduced our lending rates in Orissa, Karnataka and Andhra from 15 per cent (flat) to 12.5 per cent recently,” Mr Raj said.

SKS, which had ‘pioneered’ securitization of portfolio in MFI sector, had also tied up with Religare for commercial papers worth Rs 25 crore.

“This is the first standalone debt paper from a Mutual Fund to MFI,” Mr Raj said.

SKS, which has over 19,000 employees on its rolls, is now currently adding 1000 new employees every month to its field force for expanding its reach, he added.

Source: http://www.istockanalyst.com/article/viewiStockNews/articleid/3730342