HC rejects petition to declare microfinance law unconstitutional

The Andhra Pradesh High Court on Monday disposed of a petition that sought to declare the Andhra Pradesh Micro Finance Institutions (Regulation of Money Lending) Act 2010 as illegal and unconstitutional.

However, the court suggested the Andhra Pradesh government review its Act as a new bill related to microfinance sector is currently pending in Parliament.

A division bench comprising Chief Justice Pinaki Chandra Ghose and Justice Vilas V Afzalpurkar, has asked the state government to examine whether the interests of borrowers, particularly, the self-help groups was protected by the RBI regulations pursuant to the Malegam Committee recommendations.

SKS Microfinance in its petition appealed to the court to declare the Andhra Pradesh Act as illegal, null, void and unconstitutional and beyond the competence of the Andhra Pradesh legislature.

The RBI, in its affidavit filed in the court, also said that it is the sole regulator of NBFC-MFIs and the state government's Act will create dual regulation of the sector.

Reddy Subrahamanyam, principal secretary, rural development, Andhra Pradesh, said they are yet to receive the order copy and as per court order would certainly examine the Central law vis-à-vis the state law. The Micro Finance Institutions (Development and Regulation) Bill, 2012, is being scrutinised by a parliamentary committee.

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