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Updated: December 8, 2010 13:05 IST

AP govt to introduce microfinance bill on Dec 10

PTI
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A protester along with her child participating in the Dharna infront of DRDA Office in Khammam on Thursday. Against Micro Finance. Photo: G. N. Rao.
THE HINDU A protester along with her child participating in the Dharna infront of DRDA Office in Khammam on Thursday. Against Micro Finance. Photo: G. N. Rao.

The Andhra Pradesh Government is all set to introduce the microfinance bill, which seeks to curb the exploitation of rural borrowers by lending companies, on December 10 during the winter session of the State Assembly, a senior bureaucrat said.

The official, however, said there will not be any cap on the interest rates being charged by microfinance institutions (MFIs) in the bill.

“The ordinance which was promulgated in October will be introduced as it is,” Principal Secretary, Panchayat Raj and Rural Development, R Subrahmanyam told PTI.

“There will not be any modification in the bill. We are very firm on curbing the coercive methods in recoveries. We have prepared our report and that will be submitted to a RBI team that is scheduled to visit the state on December 15. We are making an elaborated submission,” Mr. Subrahmanyam told PTI.

The microfinance bill makes registration for MFIs mandatory, with non-registration resulting in a three-year jail term or Rs one lakh fine.

MFIs must take prior approval from the registration authority to give loans to SHG members, who have already availed of bank finance.

Attempts to recover the loan through coercion will attract a three-year jail term or Rs one lakh fine or both, among other punishments.

Meanwhile, the Microfinance Institutes Network (MFIN) is likely to file a petition in the Andhra Pradesh High Court seeking early disposition of their plea that sought quashing of the ordinance against MFIs, MFIN Counsel Niroop Reddy said.

Mr. Subrahmanyam said the government was concerned about multiple lending offered by MFIs, rather than putting a cap on the interest rates.

“We have not received any requests from MFIs for the modification of ordinance officially. After the ordinance, all the illegal activities were put to stop. Capping interest rate is easier but monitoring will be difficult,” he said.

Interest rate is a very minor thing when compared to multiple lending. The Government found out that the whole trouble started due to multiple lending, he added.

“MFIs offered multiple lending to rural people without any due diligence. That’s the main problem. Now we are asking them to upload database of the borrowers. They uploaded around 1.12 lakh records. By December 15 they (MFIs) will have to upload all the details of borrowers. We will monitor all the activities from the database,” the official said.

To a query, he said money lending control is a State subject. “If the Centre wants to regulate it then they will have to see the constitutional provision,” he said adding that the total amount disbursed to SHGs in the State was in the range of Rs 1300 crore last month.

In a Cabinet meeting held at the State Secretariat here on Friday last, Chief Minister N Kiran Kumar Reddy told the ministers that it was essential to introduce a bill in the Assembly.

Minister for Self Help Groups (SHGs) and Women Development Sunitha Laxma Reddy had said that the Chief Minister was keen on introducing the bill to protect the interests of the poor, who were being fleeced by the MFIs.

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