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MFI Bill introduced in AP Assembly

BS Reporter  |  Chennai/ Hyderabad 

Legislative affairs minister D Sridhar Babu on Saturday introduced the Andhra Pradesh Micro Institutions (Regulation of Money Lending) Bill, 2010 in the Assembly.

This would replace the Andhra Pradesh Micro Institutions (Regulation of Money Lending) Ordinance that the state government brought out in October this year after the state witnessed a spate of suicides by the borrowers.

The Bill, which seeks to protect self-help groups from exploitation by micro institutions, does not contain any changes as asked by the Micro Finance Institutions’ Network (MFIN) alleging that some provisions were proving a hurdle for them to carry out their business.

Two days ago, MFIN stated that a House Committee should examine the provisions of the Bill to ensure that microfinance industry did not collapse in the state.

MFIN president, Vijay Mahajan, said the state should also wait for the Malegam Committee, constituted by the Reserve Bank India, to makes its recommendations.

The state government pointed out that some MFIs lent at usurious rates of interest of 54 per cent and they had not done due diligence to ascertain the repaying capacity of borrowers. The MFIs were using coercive methods to recover the loans from the borrowers, it said.

The Bill does not talk about any interest cap on the MFI loans. However, it makes registration of the MFIs mandatory and puts the onus on the MFIs to disclose the interest rates they would charge. The Bill has provision for a penalty for those violating the provisions of the Bill.

According to MFIN, the MFIs are not in a position to recollect about Rs 7,200 crore outstanding loan amount in the state and could not lend about Rs 1,200 crore since October.

First Published: Mon, December 13 2010. 02:22 IST