A southern Indian state is actively investigating 76 criminal cases _ some that had been closed by police _ against employees of Indian lenders accused of driving overindebted borrowers to suicide, officials said Thursday.
Andhra Pradesh, which was India's largest microfinance market, blamed a spate of suicides in late 2010 on aggressive lending and collection tactics by microfinance companies. The companies denied responsibility.
R. Subrahmanyam, principal secretary for rural development in Andhra Pradesh, said his department had sent teams to villages to assist police investigators and are scheduled to report their initial findings next Wednesday.
Some of the cases may have been closed or stalled, he said.
"If they stumble on good evidence, they can always be reopened," he said, adding that police are often overburdened and may not have always found the "correct lead."
To date there have been no convictions and after scores of earlier arrests, no microfinance company employees are currently in jail, according to Andhra Pradesh officials.
The government decided to reinvigorate the investigations after an Associated Press story showed that despite denials, top officials from India's SKS Microfinance had information from a report commissioned by the company implicating its employees in borrower suicides.
SKS stands by its affidavit before India's Supreme Court that it "is neither the cause of nor responsible for any suicides in the state of Andhra Pradesh."
SKS is a market leader in India's microfinance industry, which specializes in small loans intended to lift up the very poor. SKS employees were named in 15 of the 76 cases, the company said. In two cases, they were exonerated by courts. One case is ongoing. The company maintains that in the remaining 12, they have been cleared by police.
Another report commissioned by industry group Microfinance Institutions Network last year found evidence linking the actions of employees from four leading companies _ including SKS, Spandana and Share _ with 13 borrower suicides or attempted suicides, according to Davuluri Venkateswarlu, the director of Glocal Research in Hyderabad, who did the report.
He said the state government had overstated the role of microfinance companies in borrower deaths, but that in nine of the 44 deaths he examined he believed the companies should be prosecuted.
"You cannot go to a person with a group of people and abuse him," he said.
His report has not been made public.
P.N. Vasudevan, managing director of Equitas Microfinance and a member of the board of the Microfinance Institutions Network, said MFIN would not release the report.
"That report was never meant for public consumption," he said. "Based on the feedback, we wanted to change our own code of conduct. That was done."
New regulations by the central bank and self-regulation by MFIN's members will prevent future excesses, he said.
He said a new sobriety has settled on the industry, which is now gripped by a "strong belief that overlending can cause a lot of damage."
"Things are dramatically different," he said. "With the crisis, people are suddenly happy to be responsible. If it hadn't happened, people would have been happily growing their loan books and not worrying about silly things like credit bureaus."
He said the new lending norms, which cap interest rates charged to borrowers at 26 percent, make it impossible for microfinance companies to chase unseemly profits.
"Ultrahigh returns are a thing of the past," he said.
Money is beginning to trickle back to Indian microfinance companies. SKS has been among the most successful in attracting funds.
On Thursday it said it had sold two pools of loans worth 2 billion rupees ($40 million) to two unnamed banks. That was the 11th such sale since a 2010 Andhra Pradesh law placed new restrictions on lending and collection, which effectively shut down microlending there and cut off funding to the sector. Earlier this year, SKS securitized 6 billion rupees ($120 million) worth of loans, and Bandhan Financial Services, another microfinance company, securitized 5.5 billion rupees ($110 million) worth of loans.
Shares in SKS, India's only publicly traded microfinance company, have risen 15.2 percent this week on hopes that the national Parliament will soon consider a bill that would clarify microfinance company regulation and supersede the Andhra Pradesh law.