SKS Microfinance, SE Investments rally on RBI borrowing policy

Shares of micro finance companies such as SKS Microfinance and S.E. Investments have rallied by up to 7% on the bourses in an otherwise weak market after the Reserve Bank of India (RBI) raised the borrowing limits.

S.E. Investments has rallied 7% to Rs 379 on the National Stock Exchange (NSE). SKS Microfinance moved higher by 5.5% to Rs 499, also its 52-week high on the NSE. The CNX Nifty is down 1% at 1329 hours.

“Taking into consideration the improvement in the Micro-Finance Institutions (MFI) sector and recommendations of the Committee on Comprehensive Financial Services for Small Businesses and Low Income Households (Chairman: Dr. Nachiket Mor), there is a need to revise upwards the limit relating to total indebtedness of the borrower, eligible rural and semi-urban household annual incomes and loan amounts to be disbursed in the first cycle and in subsequent cycles,” the RBI said in a statement.

The total indebtedness of a borrower, excluding educational or medical expenses, should not exceed Rs 100,000 from Rs 50,000 earlier, the central bank said.

Loan disbursed to a borrower with a rural household annual income not exceeding Rs 1,00,000 (enhanced from Rs 60,000) or urban and semi-urban household income not exceeding Rs 1,60,000 (enhanced from Rs 1,20,000). Disbursement of the loan amount not to exceed Rs 60,000 (enhanced from Rs 35,000) in the first cycle and Rs 1,00,000 (enhanced from Rs 50,000) in subsequent cycles, it added.

The detailed guidelines will be issued shortly, the RBI said.