Govt plans two Rs 500 cr funds for credit to poor

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Finance Minister P Chidambaram today said the government would set up a Financial Inclusion Fund and a Financial Inclusion Technology Fund with a corpus of Rs 500 crore each for easy credit to the poor.

The move was suggested by the Financial Inclusion Committee, headed by C Rangarajan, chairman of the Prime Minister's Economic Advisory Council.

The government has also called for a debate on the controversial aspects of the Microfinance Bill, which is before a parliamentary committee.

The Bill, which has been criticised by NGOs and microfinance institutions (MFIs), does not regulate MFIs but only self-help groups that are often run by NGOs.

Chidambaram, while acknowledging the need for a debate, was defensive on the Bill. "That we don't have a draft Bill for 'for-profit' MFIs does not mean the present Bill is bad," he said.

Addressing a conference organised by Microfinance India, the finance minister said there should be a debate on whether 'for-profit' MFIs should be regulated. Any recommendation from stakeholders would be seriously considered, he added.

The microfinance sector has, however, criticised the Bill. Vijay Mahajan, a member of the Nabard's committee on financial inclusion, attacked the regulators' mindset that offering financial services to the poor was charity and hence good-hearted NGOs should enter microfinance.

Financial Services Department Secretary Vinod Rai said the Bill would take into account the views of all stakeholders and the final draft would be acceptable to all.