State Bank of India (SBI) has an exposure of Rs 300 crore to the

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troubled microfinance sector in Andhra Pradesh and the public sector lender feels the loans are "safe".

Loans have been given to two microfinance institutions (MFIs) in the state, K Shiv Kumar, Deputy Managing Director of SBI, said today.

"We don't have much exposure (to MFIs) compared to some other banks in the state. We have about Rs 300 crore in Andhra Pradesh. We have already disbursed the loans," he told mediapersons here on the sidelines of launch of cyber payment services of AP Commercial Tax department.

He, however, admitted that the situation is "grim" at the ground level in Andhra Pradesh after the state promulgated an ordinance last month regulating MFIs, who have been accused of deploying coercive methods to recover loans.

To a query, the top SBI executive said there are no applications pending from any MFI with the bank for further loan. "We have lent to two companies. Whenever there is requirement we do give loans. There is no new loan proposal from the MFIs. We believe the money is safe."

He declined to divulge the names of the two companies.

SBI's associate, State Bank of Hyderabad (SBH), had earlier said it had a Rs 70-crore exposure in the MFI sector in the country.

Meanwhile the Andhra Pradesh government today filed its reply to the writ petition filed by SKS, MFIN and others challenging the ordinance promulgated by the State Government on October 15.

The government in its reply said the Microfinance ordinance was brought not to harass but regulate the industry. It also said the state government is a competent authority to bring out such ordinance.

Another PSU lender, Andhra Bank, had said it had lent Rs 300 crore to the microfinance industry.

According to Vijay Mahajan, President, Microfinance Institutions Network (MFIN), the collection by MFIs in the state had significantly reduced and banks who have lent huge loans to MFIs are apprehensive about the situation.

He blamed the political leaders for the low collection, saying they are campaigning that the microfinance loans will be waived.

"Collections have been reduced to a trickle. That's because in many places, political leaders are telling people that there will be a loan waiver. The news is spreading. So the collections have fallen, particularly Gramni Bank type (weekly collection)," Mahajan told PTI.

India's largest microfinance company, SKS Microfinance - a listed entity - today informed the BSE that its collections in Andhra Pradesh have dropped below the normal after the payment cycle moved from week to month.