Microfinance Focus, September 7, 2011: SKS Microfinance may approach the Reserve Bank of India (RBI) for a banking license. However, its Board of Directors has not finalized this decision. SKS microfinance, based in Hyderabad, is India’s largest and only listed microfinance institution (MFI).

“Seeking a banking license is a strategic option for us. The economic rationale behind this proposal is to mitigate risks, gain access to funds and reduce the cost of funds. We will present the proposal to the board during the forthcoming meeting. Once we get the approval, we will approach RBI for its nod,” Dilli Raj, CFO of SKS told The New Indian Express. There are analysts that have expressed doubt if this move, obtaining a banking license, will improve the situation for SKS microfinance. Before taking a decision, the RBI will have to check the financial stability of the company.

SKS microfinance has been going through a difficult period, since the introduction of the Andhra Pradesh Microfinance Ordinance that introduced a list of regulations for MFIs to follow.  SKS microfinance stocks had fallen by 58% in the month of august alone. SKS posted a loss of Rs. 219 crore in Q1 this year as against a net profit of Rs. 66 crore in the same quarter last year. The MFI has a Rs. 1,135 crore of outstanding loan amount in the state.