HYDERABAD: The high-level committee on micro finance has urged the Reserve Bank of India to inquire into alleged violations and coercive practices adopted by micro-finance institutions in recovering outstanding loans from borrowers.

At its first meeting here on Friday, the committee asked the Registrar of Cooperative Societies to probe the functioning of certain MFIs which were registered under the Mutually Aided Cooperative Societies Act. Chaired by Principal Secretary (Rural Development) K. Raju, the meeting examined the report submitted by Special Chief Secretary V. S. Jauhari and CEO of Society for Elimination of Rural Poverty T. Vijay Kumar.

A senior official of Rural Development Department told The Hindu that the meeting recommended a code of conduct for MFIs. "The code of conduct brought out by Sadhan, a nodal agency representing MFIs was discussed," he said.

Members of the committee suggested that there should be State and district-level sharing of information on lending to borrowers. It was not desirable to go for multiple lending without realising repayment capacity of borrowers. The problem could be resolved if banks, MFIs and the administration shared information with each other, they felt.

All MFI loans should be routed through the Village Organisations (VO) and not individually. Officials opposed creation of new groups by splitting the existing groups as this would badly damage the thrift movement.

"We have also directed all MFIs to return house pattas, blank bond papers and white papers collected illegally by recovery agents", he said. "The members felt a code of conduct should also be evolved for banks that finance MFIs."

Internal probe held

An RBI official told the meeting that an internal probe had been completed into the charges against MFIs. Mr. Mathew Titus of Sadhan said MFIs would adhere to the code. The meeting said all recovery agents should be properly trained and certified by an independent agency.

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