Double trouble for microfin firms

The microfinance industry, facing flak for coercive measures, received another jolt on Friday, with the Andhra Pradesh High Court refusing to stay a state government ordinance that sought to control MFIs and state police detaining three MFI officials — of SKS Microfinance and Spandana — on harassment charges.

The microfinance industry, facing flak for coercive measures, received another jolt on Friday, with the Andhra Pradesh High Court refusing to stay a state government ordinance that sought to control MFIs and state police detaining three MFI officials — of SKS Microfinance and Spandana — on harassment charges.

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Around 45 borrowers have committed suicides in the last six months.

The police also indicated that they might book cases against Vikram Akula and Ms Padmaja Reddy, promoters of the two MFIs as per the provisions of the new law. “While interrogating the arrested, we came to know that the recovery officials were acting under the instructions of their company management. So under the new Ordinance, Vikram Akula and Padmaja Reddy may also come into the case,” said Ch Srikanth, Superintendent of Police, Kurnool.

Meanwhile, the high court allowed MFIs to collect repayments, in accordance with the law. The state government has also been asked not to file cases against managers and employees of MFIs visiting houses of the borrowers to collect repayments.