RBI workshop on proposed money lending legislation

The Reserve Bank of India (RBI) is holding a workshop here this month on the proposed model money lending legislation. RBI Governor Y V Reddy is expected to participate in the workshop, according to senior officials in the state finance department.

The aim of the proposed legislation is to bring the informal sector into the banking fold, according to officials. A proposal to appoint bank correspondents in remote rural areas, where it is not feasible to set up a bank branch, to process loan applications is also under the consideration.

Besides farmers, the move is also aimed at extending credit facility to rural families subsisting on non-farm activities, including handicrafts.

The Andhra Pradesh government is keen to bring a legislation on interest rates after some micro finance institutions reportedly collected up to 24 per cent interest from poor and marginal families resulting in the state's intervention.

Though the previous government brought in a Bill on money lending, it could not become a legislation due to the Centre's refusal to send it for President's assent on grounds that certain provisions of the Bill had exceeded the state's jurisdiction.

According to finance department officials, the proposed model legislation will facilitate the state government to check unscrupulous practices in money lending.