Much to the chagrin of micro finance institutions, the Andhra Pradesh government introduced the Andhra Pradesh Micro Finance Institutions (Regulation of Money Lending) Bill' in the Assembly on Friday. The government has also refused to make any changes in the ordinance before making it a bill despite efforts made by MFIs to modify some sections that have an adverse impact on their business.
Andhra Pradesh was the first state in the country to come out with an ordinance in October to regulate MFI activity in the state. The aim was to clamp down on the coercive methods adopted by MFIs to collect money from borrowers as the government was under severe pressure from all political parties as they feared the collection methods used by MFIs lead poor in rural areas to commit suicide.
The Assembly, however, is yet to hold any discussions on the bill. The bill is expected to be passed this session as there is political consensus from all parties.
Microfinance Institutions Network (MFIN), a self-regulatory body floated by NBFC microfinance institutions, on Thursday had said its members would be forced to take the extreme step of closing down their operations in the state if the hostile conditions did not improve.
According to Vijay Mahajan, president, MFIN, their business activity came to a grinding halt and collection rate dropped to 20% from 95% after the state government passed the ordinance. `This can have far reaching implications on the entire credit system as MFIs borrow money from banks to lend it to their customers, said Mahajan. He pointed out that during the last 45 days 12 lakh loans worth Rs 1,200 crore could not be disbursed due to the hostile conditions. We are unable to collect Rs 7,400 crore from our borrowers. If it continues it will affect the entire Rs 24,000 crore given to MFIs by banks. Besides, it is also demoralizing our 2 lakh staff, he said.
The ordinance makes it mandatory for all MFIs to register. Though 81 MFIs have already registered they are unable to provide new ration card numbers and self help group (SHG) names for their 97 lakh borrowers. MFIs are not able to disburse loans as the ordinance requires them to obtain permission from District Rural Development Project officer before giving loans to SHG members. Besides, the ordinance also prohibits weekly repayment by borrowers.
Meanwhile, the state High Court is yet to come out with a verdict on the writ petition filed by MFIN challenging the constitutionality of the state ordinance.
+1.jpg)
0 comments
Post a Comment