The Andhra Pradesh government today issued an ordinance to stem the alleged abusive practices adopted by microfinance institutions (MFIs) operating in the state. One of the key steps the ordinance has proposed is setting up of fast-track courts in every district for MFI-related issues.
Announcing Governor ESL Narasimhan’s assent to the Andhra Pradesh Microfinance Institutions (Regulation of Money Lending) Ordinance, 2010, Minister for Rural Development Vatti Vasantha Kumar told reporters the government would set up these fast-track courts in consultation with the Andhra Pradesh High Court to clear MFI-related cases within three months. The ordinance came into effect today.
The ordinance has made it compulsory for MFIs to get themselves registered with the project director of the district rural development authority for one year, showing their areas of operation, employees, number of members and credit status.
The registration has to be done within 30 days from the date of the issue of the ordinance.
MFIs are also required to display interest rates prominently on a board.
The minister said some MFIs were indirectly charging 52-54 per cent. Another key feature of the ordinance is that the interest amount on a loan can’t exceed the principal.
