[/caption]News courtesy-Andhra Jyothi
Hyderabad, Dec 9 : Microfinance companies, facing a tough time in Andhra Pradesh after the state promulgated an ordinance to regulate micro-lending, today requested the government to wait for a report of a RBI-appointed panel before making the October ordinance into a Bill.
Micro Finance Institutions Network (MFIN) also requested State legislators to establish a House committee to study the microfinance Bill before passing it. The government is set to introduce microfinance Bill in the Assembly in the winter session which begins from tomorrow.
The RBI, in the last week of October, appointed a sub- committee under Chairmanship of Y H Malegam to look into the functioning of MFIs. The panel was asked to submit its report in three months.
It has been tasked with examining recovery mechanism of microfinance institutions and their interest rate practices, amid criticism of these lenders charging exorbitant loans rates and using strong arm tactics for recovery.
"The committee members are scheduled to visit the state on December 15 or 16. The Government should wait at least till the committee submits its reports," MFIN president Vijay Mahajan told a press conference.
According to the October 15 ordinance, all microfinance institutions operating in the state should register with the district officials. It also prohibits multiple lending by MFIs and the repayment cycle was converted from weekly to monthly.
However, the MFIN suggested some amendments, which according to them will help conduct business smoothly despite the ordinance in place. One of them is statewide registration instead of district level.
"There has to be a single state-wide registration. RBI gives us (MFIs) single national registration which is valid forever," Mahajan said.
They also suggested that the repayment option should be left to borrowers, and instead of putting cap on multiple lending the government can limit the loan amount per borrower.
"There is credit requirement of Rs 40,000 per borrower and availability is just Rs 17,800. As long as that gap is fulfilled by MFIs, it should be allowed. Whether the government puts limit of Rs 50,000 or Rs 40,000 it is a question of discussion. We are open to that," Mahajan said.
According to him, banks have stopped lending to microfinance companies due to the prevailing situation in the state. He said the MFIs have repaid bank loans of around Rs 1,500 crore to Rs 2000 crore during the past 45 days.
"We were able to pay our loans from the collections made from other states like Bihar and Chhattisgarh," Mahajan said.
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