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Microfinance Bill introduced in Andhra Assembly

BS Reporter  |  Hyderabad 

Legislative Affairs Minister D Sridhar Babu today introduced the Andhra Pradesh Microfinance Institutions (Regulation of Money Lending) Bill in the Assembly.

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

The Bill, which seeks to protect self-help groups from exploitation by microfinance institutions (MFIs), does not contain any changes sought by the Microfinance Institutions’ Network (MFIN), which alleged that certain provisions were proving a hurdle to carrying out the business.

Two days ago, it said a House Committee should examine the provisions of the Bill to ensure the 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 make its recommendations.

The state government pointed out that some MFIs lent at usurious rates as high as 54 per cent and did not indulge in due diligence to ascertain the repaying capacity of the borrowers. They used coercive methods to recover the loans, it said.

The Bill does not talk about any interest cap on MFI loans. However, it makes registration of MFIs mandatory and puts the onus on the them to disclose the interest rates they charge. It also has a penalty clause for those violating its provisions. According to MFIN, MFIs are not in a position to recover outstanding loans worth Rs 7,200 crore in the state and have been unable to lend about Rs 1,200 crore since October.

First Published: Sun, December 12 2010. 00:52 IST