In­dian banks get­ting cau­tious about lend­ing to MFIs news

The Pak Banker - - Front Page -

NEW DELHI: Amid hec­tic con­fab­u­la­tions be­tween the govern­ment, mi­cro­fi­nance in­sti­tu­tions and the Re­serve Bank of In­dia about con­struct­ing ap­pro­pri­ate frame­work for reg­u­lat­ing MFIs, com­mer­cial banks are now ink­ing con­tracts with MFIs to en­sure they do not charge in­ter­est rates be­yond a cer­tain ceil­ing.

Most MFI clients are farm­ers, poor ru­ral women and daily wage earn­ers. The move comes amid al­le­ga­tions, es­pe­cially in Andhra Pradesh where MFIs have been most ac­tive, that they charge usu­ri­ous rates of in­ter­est and use co­er­cive meth­ods of col­lec­tion. At the same time, ex­perts feel MFIs are crit­i­cal for push­ing the ob­jec­tive of fi­nan­cial in­clu­sion. The Andhra Pradesh govern­ment has gone so far as to pro­mul­gate a highly re­stric­tive or­di­nance to reg­u­late these en­ti­ties, which is now wait­ing to be passed into law.

The state govern­ment has ig­nored pleas from union fi­nance min­is­ter Pranab Mukher­jee to di­lute the new law. -PB News

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