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MFIs ready to reschedule repayment period

Prashanth Chintala  |  Chennai/ Hyderabad 

(MFIs) in Andhra Pradesh are mulling to extend the period of repayment by their borrowers by 2-3 times depending on the quantum of amount lent.

This means that if the loan repayment period was originally fixed as one year, now it could be two or three years depending on the amount lent and the earning capacity of borrowers.

The MFIs informed this at a meeting convened by the state government here on Friday.

“They have given some outline. We are awaiting a written proposal from them in this regard,” principal secretary of state rural development department, Reddy Subrahmanyam, told Business Standard.

MFIs in the state are said to be having an outstanding loan portfolio of Rs 7,500 crore. Rescheduling of loans was a matter between MFIs and their borrowers and “the government is only an observer in this aspect,” Subrahmanyam said indicating that MFIs wanted to reschedule the loans out of their own necessity.

The borrowers right now are unable to repay the amount in the scheduled time as the MFIs have given substantial amount as loans without considering the repayment capacity of the borrowers. “There is no correlation between the amount given as loan and the income level or the ability of the borrower to pay,” he said.

The promulgation of an ordinance by the state to prevent coercive methods being used by MFIs to recollect the loan amount had also emboldened the borrowers to seek rescheduling of the repayment period.

“The MFIs have antagonised the people so much that even now their agents are unable to enter some of the villages” to collect the installments due, he said.

According to Subrahmanyam, the first thing the MFIs should now do is to win the confidence of the people and rescheduling of the repayment period is one way. “This is a positive development.”

Network chief executive officer, Alok Prasad, said the MFIs had not approached the government on their own with a proposal for rescheduling. “The government has convened the meeting,” he said.

Meanwhile, the state government has decided to introduce the in the winter session of the Assembly to be held from next week.

First Published: Sat, December 04 2010. 00:51 IST