Government to challenge SC order on SKS operations

Published: 22nd March 2013 08:11 AM  |   Last Updated: 22nd March 2013 08:11 AM   |  A+A-

Days after the Supreme Court issued an interim order allowing SKS Microfinance Ltd to resume operations in Andhra Pradesh, sources said the state government is  likely to challenge the apex court order.

“We have not been issued any notice by the Supreme Court in this case. As far as our interpretation goes, the Court did not set aside AP MFI Act,” a source said.

On March 18, the SC issued an order allowing SKS to conduct business in the state without having to seek approvals from the state government for every loan it disburses. Currently, SKS and all other NBFC MFIs are barred from offering micro loans to borrowers allegedly for charging exorbitant interest rates and using coercive loan recovery practices.

In Dec 2010 it introduced a self-styled AP MFI Act preventing MFIs from doing business without seeking necessary approvals from the government. SKS first moved the High Court challenging the move. The HC ruled in favour of the government, following which SKS moved SC.  Other MFIs have to file petitions in SC to get relief from the Act. While SKS need not secure approval for every new loan it offers, it  has to adhere to the Act as far as interest rates and recovery practice clauses are concerned.

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