The largest microfinance institution of the country, SKS microfinance has announced a major slash in interest rates by as much as 212 basis points. The interest rates now lie at 24.55% as against 26.67% earlier across the whole country and not only Andhra Pradesh.
"This is a single rate at which the loans will be extended to the borrowers and no other costs would be charged additionally," said a company spokesperson.
SKS earlier charged 1% processing fees and 2% as credit shield (insurance against default). Under the slashed rates, these fees have been waived off.
But the waivers also mean an end to benefits associated with them. Earlier in case the borrower died before the term of loan got completed, the company paid Rs 1000 as funeral charges along with repaying back the unpaid loan amount to the borrower.
"Now, we have decided to stop extending those benefits and cut the rate. We have also negotiated with the insurance provider for a lower premium, which has been built into the effective rate," the official said.
The company has major presence in Andhra comprising almost 25% of the total portfolio.