MICROCAPITAL BRIEF: Government of India’s Andhra Pradesh Moves to Challenge Supreme Court Interim Order as SKS Microfinance Resumes Operations in the State

As Indian microfinance institution (MFI) SKS Microfinance prepares to resume operations in the Indian state of Andhra Pradesh under a recent Supreme Court order, the Andhra Pradesh state government is moving to challenge the Supreme Court’s decision. The interim order allows SKS to resume operating in the state without obtaining the no-objection certificates from the state government that had been mandated by the Andhra Pradesh Microfinance Institutions (Regulation of Money Lending) Ordinance of 2010. The order also allows SKS to recover loans on a weekly rather than the monthly basis specified by the 2010 law. Other aspects of the 2010 law still hold, such as those regarding loan disbursements, interest rates and recovery practices.

The Supreme Court issued the order in response to a petition by SKS challenging the recent dismissal of previous petitions filed by SKS and other MFIs against the 2010 ordinance by the state High Court. The order applies to SKS only, as it was the filer of the petition.

Reddy Subramaniam, the principal secretary of rural development for the government of Andhra Pradesh reportedly said, “The interim relief came without any notice to the state government, which is the main party in the SKS case… Hence, we have decided to challenge the interim relief order at the earliest.” While many microlenders stopped operating in the state because they judged that the 2010 Andhra Pradesh law would prevent them from doing so profitably, Mr Subramaniam reportedly commented that there was no ban on the operations of SKS: “We have neither arrested anybody so far as claimed by the company and not stopped them from recovering their dues from borrowers.”

By Nicole Boyd, Research Associate

About SKS Microfinance
SKS Microfinance is a for-profit microfinance institution (MFI) that was launched in 1998. SKS converted into a public limited company in May 2009 and launched an initial public offering on July 28, 2010. It since diversified into offering gold loans and microinsurance services but does not accept deposits. As of September 30, 2012, SKS reported total assets of USD 354 million and a gross loan portfolio of USD 250 million disbursed to approximately 3.9 million borrowers. As of March 2012, SKS reported return on assets (ROA) of -45.8 percent and return on equity (ROE) of -111 percent. SKS trades on the Bombay Stock Exchange and India’s National Stock Exchange.

Sources and Additional Resources:

The Hindu. “SKS Microfinance gears up for re-entry,” http://www.thehindu.com/news/cities/Hyderabad/sks-microfinance-gears-up-for-reentry/article4535012.ece

The Indian Express. “AP to challenge Supreme Court relief for SKS Microfinance on resuming ops,” http://www.indianexpress.com/news/ap-to-challenge-supreme-court-relief-for-sks-microfinance-on-resuming-ops/1091584/

MicroCapital. March 26, 2013, “MICROCAPITAL BRIEF: Supreme Court of India Issues Interim Order Loosening Restrictions on SKS Microfinance in Andhra Pradesh,” https://www.microcapital.org/microcapital-brief-supreme-court-of-india-issues-interim-order-loosening-restrictions-on-sks-microfinance-in-andhra-pradesh/

MicroCapital. February 27, 2013, “MICROCAPITAL BRIEF: SKS Microfinance May Challenge Andhra Pradesh Ruling in Supreme Court,” https://www.microcapital.org/microcapital-brief-sks-microfinance-may-challenge-andhra-pradesh-ruling-in-supreme-court/

MicroCapital story, February 20, 2013, “MICROCAPITAL BRIEF: High Court of Indian State Andhra Pradesh Upholds Microfinance State Law, Rejecting Microlenders’ Petition,” https://www.microcapital.org/microcapital-brief-high-court-of-indian-state-of-andhra-pradesh-upholds-microfinance-state-law-rejecting-microlenders-petitions/

MicroCapital story, February 12, 2013, “MICROCAPITAL BRIEF: Microfinance institutions (MFIs) in India’s Andhra Pradesh Face Difficulties Even After Loan Restructuring, “Survival of MFIs” Said to Hang on Court Decision Regarding State Law,” https://www.microcapital.org/microcapital-brief-microfinance-institutions-mfis-in-indias-andhra-pradesh-face-difficulties-even-after-loan-restructuring-survival-of-mfis-said-to-hang-on-court-decision-regar/

MicroCapital. May 23, 2013. “MICROCAPITAL BRIEF: Supreme Court Schedules Hearing on Petition Filed by SKS Microfinance Against Over Regulation of Moneylending Act of India’s State of Andhra Pradesh,” https://www.microcapital.org/microcapital-brief-supreme-court-schedules-hearing-on-petition-files-by-sks-microfinance-against-over-regulation-of-moneylending-act-of-indias-state-of-andhra-pradesh/

MicroCapital. May 10, 2011. “MICROFINANCE PAPER WRAP-UP: Microfinance in India – A Crisis at the Bottom of the Pyramid; Published by Legatum Ventures,” https://www.microcapital.org/microfinance-paper-wrap-up-microfinance-in-india-a-crisis-at-the-bottom-of-the-pyramid-published-by-legatum-ventures/

MicroCapital Universe Profile: SKS Microfinance https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=SKS+Microfinance

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