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SKS Microfinance gets some relief from Supreme Court’s interim order

19 Mar 2013 Evaluate

In a much needed relief to SKS Microfinance, Supreme Court has allowed the micro-lender to resume operations in Andhra Pradesh (AP). However, this would be subjected to following interest rate and recovery practice clauses of an Andhra Pradesh law regulating microfinance institutions (MFIs). Under these clauses, MFIs cannot charge interest amounts that exceed the principal and cannot engage in any coercive loan recovery practices.

With this development, SKS can now lend to the state’s rural poor without securing a no-objection certificate from the state government. The interim order passed by the Supreme Court also allows the microfinance company to recover loans on weekly basis.

However, for SKS, the order is an interim one because it had sought complete abolition of the Andhra Pradesh law, the petition for which was dismissed by the Andhra Pradesh high court division on February 11, 2013. The AP MFI Act came in the wake of uproar over harassment of clients by recovery agents of MFIs and collection of high interest rates up to 60.5% on micro loans to the poor.

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