Swayam Krishi Sangam Microfinance (SKS), has been prohibited from conducting business in Mahabubnagar District of Andhra Pradesh. The government of Andhra Pradesh has penalized the NBFC by cancelling its registration for disregarding the rules of the government in conducting business.
The District Rural Development Agency (DRDA) issued a letter to SKS Microfinance stating that the agents of the company violated the rules of Andhra Pradesh Microfinance Institutions (Regulation of Money Lending) Act, 2010 by visiting individual houses and collecting from them.
The government passed an order saying, "Since SKS Microfinance has violated the conditions of MFI Act, the registration is hereby cancelled with immediate effect and SKS Microfinance is prohibited from conducting financial activities in Mahbubnagar District".
The order further said, "The agents who visited the houses of loanees in the district were other than the notified agents... collecting money from door to door is gross violation of MFI Act".
The DRDA earlier sent the company a show cause notice to which the company had replied, but the reply was termed as ‘not satisfactory and not true.'
On the matter, a spokes person of SKS said, "We have been working closely with the authorities concerned to bring normalcy to the business in Andhra Pradesh. We are hopeful of an early solution. We have initiated the process for contesting the order in a court of law."