MFIs get HC nod to recover loans

A Bench of the State High Court on Friday directed Micro Finance Institutions (MFIs)to recover their loans from Self Help Group members and rural folk without resorting to arm-twisting measures.

The Bench, after hearing the writ petition filed by MR Rao on behalf of SKS Microfinance Limited, challenging the constitutional validity of the Ordinance issued by the State Government to regulate Micro Finance Institutions, issued interim directions in this regard.

The Court directed the MFIs to continue their operations as usual. However, they should not resort to forcible recovery of loans. If any organization resorts to such tactics, cases can be booked against such firms, the Court stated.

The Court, in its interim orders, directed the firms to register their organizations with concerned officials by one week. If any firm violates these directions, the police can register cases against them.

The Court adjourned further hearing on petition for two weeks as the state government is yet to clarify its stand on actual interest and minimum interest charged by the finance institutions as the subject was within the purview of the Reserve Bank of India.

The RBI has already constituted a sub-committee headed by YH Malegam to study the issues and concerns relating to the MFIs including the interest rates charged by them would submit its report in three months to the government.