Microfinance Focus, January 27, 2012: Government of India may introduce the much awaited Microfinance Bill in the upcoming Budget Session of the Parliament. According to a PTI report, the Finance Ministry has sent the draft Bill to the Law Ministry for approval and will subsequently seek Cabinet's nod.

The Microfinance Institutions (Development and Regulation) Bill will make Reserve Bank of India, the sole regulator of the Indian microfinance sector. Microfinance institutions will be required to register with the RBI to carry on microfinance activities.

The Bill will empower the Reserve Bank of India to issue directions to Indian MFIs regarding interest rate charged from borrowers, processing fees, insurance premium, reporting to credit bureaus, and adhering to industry’s code of conduct.

RBI will also be entitled to cancel the registration of MFIs that fail to comply with the Bill’s directives. If on inspection RBI finds the activities of any microfinance institution prejudicial to the interest of its clients or depositors or the MFI itself, it may pass an order directing such an MFI to cease and desist from continuing the microfinance activities, the Bill states.