Special ordinance for microfinance institutions from Andhra Govt

Microfinance Focus, Oct 14, 2010: Following the reports of alleged suicides of a number of poor and rural people in the state because of coercive loan recovery processes of few microfinance institutions, the Andhra Pradesh government on Thursday approved a special ordinance for restraining MFIs from such unethical behaviour and sent it for the governor’s assent according to a report on NDTV.

The state cabinet met in Hyderabad specially to approve the ordinance in view of the massive public outcry over the harassment of the poor by the MFIs, the report says. The State Rural Development Minister V Vasanth Kumar however declined talking to reporters after the cabinet meeting.

“I cannot reveal the contents of the ordinance before the Governor gives his assent. Wait for 24-48 hours,” he said. Chief Minister K Rosaiah held a video conference with the district collectors and superintendents of police (SPs) prior to the cabinet meeting and directed them to act tough on erring MFIs to prevent any harassment of those who have taken loan from them.

Rosaiah, who held meeting with state level bankers yesterday to discuss ways to help the poor loanees, told them to disburse loans expeditiously as per their targets. During the video conference, he told officials to hold district level bankers meetings to see that loans are given at reasonable rate of interest to the needy.

Vasanth Kumar said the victims of MFIs would be provided a total Total Financial Inclusion (TFI) package under which a debt-swapping module would be worked out. The debt-swapping meant conversion of higher rate of interest on loans to a lower rate, said the report.

© 2010, Microfinance News. All rights reserved. 2008-09

2 Comments on “Special ordinance for microfinance institutions from Andhra Govt”

  • Jose Sebastian Chittilappilly wrote on 15 October, 2010, 12:58

    There should be some law capping the interest rate and other charges levied by a Micro finance organization. The capping should be done considering the cost of funds and other operating expenses of MFIs. No one can deny the fact that MFIs are serving the financially excluded people and there should not be any attempt to harass the MFI s which in turn will negate the service rendered by them . It should be better if Govt. of India takes the initiative to pass the Micro Finance Bill which remains in cold storage . Ordinances or State laws will create a lot of legal hurdles as major MFIs are operating in number of states

  • D.Ravinder wrote on 16 October, 2010, 9:28

    I think, good decision has been taken by the A.P state government after many complaints from SHG members. central and state government must regulate MFI’s activities and also rate of interest. 

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