JOIN USThe Andhra Pradesh Micro Finance Institutions (Regulation of Money Lending) Bill, 2010, if passed, will replace the ordinance promulgated in October to protect the interests of women members of self help groups (SHG) and relieve them from undue hardship in the hands of recovery agents.
Introducing the bill in the house amid commotion over the Opposition’s demand for withdrawl of cases against Telangana students, Legislative Affairs Minister D Sridhar Babu said the purpose was to regulate money lending transactions by the MFIs that lent the SHGs with higher interest rates and resorted to coercive means of recovery resulting in suicides of women borrowers.
Later, Sunita Laxma Reddy, the Minister for SHGs, told reporters that nearly 10 lakh SHGs with a membership of 1.1 crore rural poor women constituted a major market to MFIs and the lending firms gave loans with rates of interest touching even 54 per cent without “verifying their repaying capacity.”
As per the bill, the MFIs have to seek approval of the District Rural Development Agency, before granting loans to SHGs. They also cannot use any coercive methods or pay a visit to the borrower’s home.
As per the bill, the member of one SHG cannot become a member of any other group and the MFIs should display the rates of interest charged in their office.
They have to register themselves in each area of their operation. They also have to provide the authorities all data on their borrowers to the official credit bureau of the Reserve Bank of India. MFIs also have to make monthly submissions to the government of their loans and collections.
Now that the government has gone ahead and tabled the bill, microfinance institutions have approached almost all the political parties and are lobbying to get the MFI legislation corrected or modified.