The Andhra Pradesh High Court Friday declined to stay an ordinance brought by the state government last week to regulate micro-finance institutions (MFIs) in the state.
A division bench of Chief Justice Nisar Ahmed Kakru and Justice Vilas Afzalpurkar asked the MFIs to register within a week as required by the government ordinance but directed the government to take action only against those MFIs violating the rules.
Dealing with a petition filed by the Micro-finance Institutions Network (MFIN) challenging the validity of the ordinance, the court issued interim directions to both the state government and MFIs.
MFIs have been allowed to collect repayments in the meanwhile, with the judges observing that they can collect their dues in accordance with the norms.
The state government was also asked not to file cases against the managers and employees of MFIs visiting the houses of the borrowers to collect repayments.
The MFIN and SKS Microfinance had challenged the ordinance on the ground that that the micro-finance players are under the regulatory purview of the Reserve Bank of India and that the ordinance had resulted in a standstill for micro-finance business in the state.
The petitioners had also challenged the mandatory registration of MFIs as prescribed by the ordinance.
The court adjourned the final hearing on the petition.
The government Oct 15 had issued an ordinance to regulate MFIs following public outcry over reported suicides of 45 borrowers in six weeks due to harassment by MFIs.
It provides for three-year imprisonment and Rs.1 lakh penalty for agents or working directors of MFIs harassing the borrowers.
Meanwhile, despite the ordinance the suicides by borrowers are continuing. Unable to bear the alleged harassment by collectors, a farmer committed suicide in Guntur district Friday.
Srinivas, who had taken a loan from a MFI, consumed pesticides at his home in Srirangapuram village.