Indian banks getting cautious about lending to MFIs news
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