YSR asks bankers not to encourage MFIs

Andhra Pradesh chief minister, Y S Rajasekhara Reddy, has asked bankers not to encourage microfinance institutions (MFIs) "as they are charging astronomical interest rates".

Addressing the State Level Bankers Committee (SLBC) meeting here on Monday, the chief minister said that some of the founders of the MFIs were leading a luxurious life at the cost of the poor. He, however, said that those who had taken loans from the MFIs should be persuaded to pay back at least at reduced interest rates.

The chief minister also wanted the committee, set up to examine the activities of MFIs in the state, to submit its report as soon as possible.

Launching the State Credit Plan 2006-07 earlier, he asked the SLBC members to disburse agricultural loans without any delay as monsoons were expected to be good even during this year.

The chief minister agreed to the request made by Andhra Bank chairman and managing director, K Ramakrishnan, for setting up a state-level training institute to impart training for the members of the self-help groups (SHGs) for capacity building.

In his welcome address, Ramakrishnan suggested setting up of the institute with an initial investment of Rs 5 crore. In this regard, he wanted the state government and the National Bank for Agriculture and Rural Development to bear 25 per cent of the cost each, while the remaining 50 per cent of cost would be borne by the five lead banks in the state - State Bank of India, State Bank of Hyderabad, Andhra Bank, Syndicate Bank and Indian Bank.

Ramakrishnan also wanted the state government to allot 25 acres of land to the institute around Hyderabad free of cost. The chief minister agreed to the proposal.

Explaining the salient features of the State Credit Plan for the current fiscal, Ramakrishnan said that a special plan was prepared for the small and medium enterprises (SME) sector under which it was proposed to disburse Rs 13,000 crore during 2006-07.

Stating that the total plan outlay was pegged at Rs 37,000 crore, he said that the pace at which agricultural credit had increased during the current year would lead to doubling of farm credit by next year.

In 2005-06, he said, the state has surpassed the target of the annual Credit Plan. As against a target of Rs 28,600 crore, the state could achieve Rs 28,899 crore.