The Andhra Pradesh Microfinance Act unveiled to hold horses of the once thriving microfinance industry seems to have affected the largest microfinance company SKS in more ways than one.

And now, the human resource team of SKS is strategising ways to tackle the rampant risks of theft, fraud and mismanagement by the field level employees.

The indiscipline has also come to the notice of the company’s auditors SR Batliboi who have pointed out that 156 cases of cash embezzlements, 205 cases of loans given to non-existent borrowers on the basis of fictitious documentation created by the employees and 47 cases of loans taken by certain borrowers in collusion with and under the identity of other borrowers.

The HR department of the company too has now initiated to curb such actions like procuring an indemnity bond from every field staff, with personal guarantee of a third person.

“Our HR team has initiated various interventions in building the confidence and the morale of staff during this year thus enabling employees to maneuver during the challenging period in a positive manner,” the company said in its annual report.

To mitigate the employee fraud risk, the company also has newly introduced a cash management system in around 200 branches as of March 2011.The system utilises an internet banking software platform that interfaces with various banks to provide real-time data information.

“After the ordinance, many employees are leaning towards committing frauds as the entire training system in place broke down for the past several months,” said an industry expert.

Meanwhile, the poster boy of microfinance Vikram Akula, who is the chairman of the company said that the act resulted in 5 per cent drop of the company’s overall loan portfolio last financial year. “Sandwiched between the brightest spots of the year were the toughest times for microfinance in India,” he said.