Microfinancier SKS shares plunge on law approval

MUMBAI: Shares in India's largest lender to the poor, SKS Microfinance, fell more than 4.5 percent in morning trade Wednesday after a state legislature approved plans to tighten regulation of the sector.

Lawmakers in the southern state of Andhra Pradesh, the hub of India's micro-credit industry, late Tuesday approved legislation to curb aggressive debt collection and steep interest rates.

Shares in SKS, India's only listed microfinance company, fell to a day's low of 711 rupees or 4.57 percent on the Mumbai stock exchange before recovering marginally to 726, still down 2.7 percent over its previous close.

SKS, which last month warned that its earnings would be hit if the legislation was approved, has seen its share price halve from a record high of 1,490 rupees in September.

The microfinance sector was until recently hailed as a saviour of India's poor for providing loans averaging 250 dollars to millions of borrowers -- often small entrepreneurs -- unable to get credit from mainstream banks.

But surging profits, accusations of heavy-handed debt collection leading to suicides, and high interest rates have led to claims that microcredit firms have become greedy moneylenders.