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Tuesday, July 19, 2011

SC gives SKS Microfinance 2 wks to amend affidavit against AP Act

New Delhi: The Supreme Court today directed SKS Microfinance, which has challenged the special act passed by the Andhra Pradesh government to regulate micro-finance institutions in the state, to amend its affidavit.

A bench of Justice Markandey Katju and Justice C K Prasad asked the SKS Microfinance to amend its affidavit within two weeks and the Andhra Pradesh government to file its reply.

"SKS Microfinance is granted permission to amend affidavit within two weeks from today. Four weeks' time, thereafter, is allowed to file reply to the additional affidavit filed by the SKS Microfinance herein," the bench said while listing the matter to September 26.

SKS Microfinance has challenged the special act of the Andhra government to regulate micro-finance institutions in the state after allegations that their high interest rates and strong-arm recovery methods led farmers to commit suicide.

SKS -- the country¿s largest and only listed micro finance company -- has submitted that the state government has no power to regulate the sector.

The state government had passed the Andhra Pradesh Micro Finance Institutions (Regulation of Money lending) Act, 2010, to ensure that it has oversight on the sector.

According to the SKS, micro finance sector falls under the central list and is not a state subject on which the Andhra Pradesh government could pass any act.

SKS further submitted that the state government can regulate only the money lending sector and not the Non Banking Finance Companies (NBFCs), which are registered by the banking sector regulator RBI.

The company also cited some recent studies on the micro- finance sector and contended that it was a central subject.

The Act empowers the state government to take action against micro-finance companies, if they violate provisions mentioned in the section 9 and 16 of the Act.

SKS has requested the Supreme Court to immediately quash the section 10 of the act, so that it can continue its operations in the state.

Source: Financial Express


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