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Sub-panel to submit report on MFIs in three months

MUMBAI: Amid growing criticism over the use of coercive ways of micro finance institutions (MFIs) to recover loans, the Reserve Bank of India on Tuesday said its sub-panel looking into the functioning of such lenders would submit its report in three months.

“The sub-committee will submit its report in three months,” the central bank said in a statement.

The RBI has set up a sub-committee of the Central Board of Directors of the central bank to study the issues and concerns of the microfinance sector, including interest rates charged by the lenders in this area. “Y. H. Malegam, a senior member on the Central Board of Directors of the Reserve Bank of India, will chair the sub-committee,” the statement added.

The RBI further said that there had been some concerns expressed in the media over high interest rates, coercive recovery processes and multiple lending practised by some microfinance institu- tions.

The Reserve Bank regulates only those MFIs which are registered with it as non-banking finance companies (NBFCs).

However, it does not prescribe lending rates for these institutions, it added.

Although the registered companies cover over 80 per cent of the microfinance business, in terms of number of companies they constitute a small percentage of the total number of MFIs in the country. Last week, the Andhra Pradesh Government issued an ordinance making registration of microfinance institutions (MFIs) with the State Government compulsory.

It aims to rein in microfinance institutions (MFIs), whose coercive tactics led to the death of a number of people in the State recently.

Christened the ‘Andhra Pradesh Microfinance Institutions (regulation of money lending) Ordinance, 2010', the ordinance came into force on October 15 with Governor E. S. L. Narasimhan giving assent to it. — PTI

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