SKS Microfinance is on the rise today. The stock which has closed yesterday at Rs.170.75, opened at Rs.171, its low point of the day and soon spurted to Rs.181.70. It has come off this intra day high but remains in the green at Rs.174 levels.

The stock has seen this buzz of activity today in the wake of the news it announced yesterday after market closure. The company stated that RBI has classified the company as a NBFC-Micro Finance Institution (non-deposit taking) or NBFC-MFI, effective 18^th Nov’13. Its status till 18^th Nov was of NBFC (non-deposit taking).

RBI has defined, in its circular of July’13, a NBFC-MFI once it fulfills the following conditions:

1: Minimum Net Owned Funds of Rs.5 crore. (For NBFC-MFIs registered in the North Eastern Region of the country, the minimum NOF requirement shall stand at Rs. 2 crore).

2: Not less than 85% of its net assets are in the nature of “qualifying assets.”

Regarding Provisioning, RBI has stated that given the problems being faced by MFIs in Andhra Pradesh many of them have had to provide sizeable amounts towards the non-performing assets in the state. To reflect the true and fair picture of the financials of the NBFC-MFI in the Balance Sheet, the provisioning made towards the AP portfolio should be as per the current provisioning norms i.e. Non-Deposit accepting or holding) Companies Prudential Norms (Reserve Bank) Directions, 2007.Provisioning for the non-AP portfolio will be as per the December 02, 2011 which is as given below with effect from April 1, 2013. The aggregate loan provision to be maintained by NBFC-MFIs at any point of time shall not be less than the higher of a) 1% of the outstanding loan portfolio or b) 50% of the aggregate loan instalments which are overdue for more than 90 days and less than 180 days and 100% of the aggregate loan instalments which are overdue for 180 days or more.