Microfinance Focus, July 6, 2011: According to auditors, SKS Microfinance recorded 408 cases of cash embezzlements and frauds in the financial year 2011. The net impact of frauds comes to around 0.070% of the total amount disbursed during the year.

Company’s annual report shows 156 cases of cash embezzlements by the employees, aggregating Rs. 16,018,106 during 2011. Fifty two of these employees were absconding.

SKS has informed the Auditors that the services of all such employees involved have been terminated and the Company is in the process of taking legal action. The Company has recovered from employees Rs. 53, 41, 192 towards cash embezzled and Rs. 10, 42, 447 under the insurance cover.

There were 205 cases of loans given out to non-existent borrowers on the basis of fictitious documentation created by the employees of the Company aggregating Rs. 45,177,531.

Further 47 cases of loans taken by borrowers under fake identity, aggregating Rs.13,786,130, were reported during the year. The Company is pursuing the borrowers to repay the money. The outstanding loan balance (net of recovery) aggregating Rs. 6,386,267 has been written off.

In the financial year 2010-2011, SKS disbursed a total amount of Rs. 7831 crores. It recovered an amount of Rs. 0.96 crore against fraud amount written off in previous years.

SKS Microfinance has recently been assigned a provisional rating of CARE A1+ (SO) to the series A PTCs issued by Indian Microfinance Loans Receivables Trust 2011 backed by microfinance loan receivable originated by the Company. Instruments with 'CARE A1 (SO)' rating are considered to have very strong degree of safety regarding timely payment of financial obligation.

According to SKS’s Founder and Executive Chairman, the company is taking some proactive steps to revitalize its operations. It will focus on consolidation of the existing borrower base instead of acquiring new ones and will diversify into lending against gold, financing kirana stores and financing the purchase of mobile phones. SKS will continue efforts to seek the Andhra Pradesh Government support in resolving the situation in the State, he said.