In an interim order, the Supreme Court allowed SKS Microfinance to resume microlending operations in Andhra Pradesh without securing a no-objection certificate from the state government.
MFI operations in the state, by and large, came to a standstill after the state government introduced the Andhra Pradesh Micro Finance Institution (Regulation of Money Lending) Ordinance 2010.
The state government passed the ordinance, subsequently enacted as law, to curb alleged reckless lending and recovery practices. After the ordinance was introduced, most MFIs in the state plunged into losses. SKS was the worst-hit.
The apex court, however, asked SKS not to resort to coercive recovery practices and the interest payable shouldnÂ’t exceed the principal.
The courtÂ’s concerns had already been addressed by the Reserve Bank of India (RBI). Besides fixing a cap of 26 per cent on the interest, RBI had imposed an individual borrowing limit of Rs 50,000.
To curb questionable recovery practices, the central bank had stipulated that all dealings with customers be conducted at public places.
Following the order, SKS, which is the only listed microfinance institution (MFI) in India, expects to recover most of the Rs 1,350 crore of debt it had written off in Andhra Pradesh.
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