MFIs want government to walk the talk on Bill

FINANCIAL REFORMS: Bill likely to supersede the Andhra Pradesh Act, recognise RBI as regulator

It was hardly a surprise, but the introduction of the Micro Finance Institutions (Development and Regulation) Bill, 2012, in the ongoing Budget session of Parliament, has left microlenders optimistic about investors' confidence returning to the sector.

The plea is the government must walk the talk now and avoid further delay in framing a national microfinance law as the crisis of confidence has reached a nadir.

The Bill, besides recognising RBI as the sole regulator, will define the role and functioning of microfinance companies, remove ambiguity over their legal forms, focus on protection of poor borrowers and tighten monitoring of the sector.

Industry players said the Bill was critical for the revival of the sector as a national microfinance law would supersede the legislation introduced by the Andhra Pradesh government in October, 2010, curbing micro-lending activities in the state.

"We were hoping for this, notwithstanding the heavy legislative agenda the finance minister is steering. While some fiscal concessions for the industry would have been nice. We are still pleased the Bill will be introduced in the Budget session. More than anything, we now want a quick passage of the Bill," Alok Prasad, chief executive of Microfinance Institutions Network), told Business Standard.

The draft of the Bill was first released in July 2011, inviting feedback from the public and other stakeholders. The inter-ministerial discussions prevented the Bill from being tabled in the winter session of Parliament.

The final draft of the Bill will be a tad different from the one that was released in July 2011, to ensure it conforms to the guidelines released by Reserve Bank of India on non-banking finance company microfinance institution (NBFC-MFI) in December 2011, industry players said.

"It will improve things at the ground level. We can resume operations in Andhra Pradesh once the Bill is passed," said S Dilliraj, chief financial officer, SKS Microfinance.