Microfinance Regulation: The Emerging Landscape

Microfinance Focus, August 8, 2012: The sixth session ‘Microfinance Regulation: The Emerging Landscape’  was moderated by Ms Mythili Bhusnurmath, Consulting Editor, Economic Times. She started off the session talking of the regulation. Does it make sense to have fewer rules and have it enforced or having large number of rules, which lie stagnant.

The panel included Mr M R Umarji, Chief Adviser (Legal), Indian Banks' Association, Mr Anurag Jain, Joint Secretary, Department of Financial Services, Ministry of Finance,  Mr Vijay Mahajan, Chairman, BASIX and Mrs Archana Mangalagiri, General Manager, DNBS, Reserve Bank of India who joined via tele conferencing from Mumbai.

Mr M R Umarji, said that he drafted the MF Bill and Sa-Dhan took it to the ministries. The old bill lapsed on several issues and was dissolved. The new bill has been tabled and is yet to get approved. He said there is a basic issues, which is ‘if MFIs are money-lenders how can, parliament make the proposed law?’ Such questions were answered and RBI had formulated schemes for lending to MFIs he said. Mr Umarji widely discussed the regulation of NBFCs engaged in Micro Finance business. Other concerns that gnawed were unfair debt recovery practices and overindebtedness.  Provisions have been made in the bill for this, he said. From having state and district level advisory councils, the RBI will have wide powers. He hoped that the bill gets passed very soon.

Mrs Archana Mangalagiri said that financial inclusion program must be included in commercial lines and not on a charity basis. She at spoke at length about the MF bill. It is a positive move to bring MF under a single regulator she said. It takes away the uncertainty that the MF sector facing. “We do not want separate states having separate rules”, she added. The RBI is clearly for regulation, but they do not want to be regulators.

Mr Anurag Jain, spoke to the occasion, he said that Financial Inclusion is the top most priority for the Govt. The structure has been formed. The rules and regulation will fill the actual structure. The bill has gone to the standing committee and they take it forward.

Mr Vijay Mahajan, said that there was a near universal consensus on the way forward. The spirit of the bill already lays out reasonable highway for the MF. He spoke about the inter-state cap being removed. We must remember that it’s an ongoing dialogue in the industry. He said that it is totally in ease with the bill. We should define financial vandalism and it needs to be brought into the bill.

A question answer session followed. Ms Mythili Bhusnurmath concluded saying that it was a happy state affairs were the regulator and the regulated saw eye to eye.

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