MFIs should recover loans respectfully: FM

Tags: News
The micro-finance institutions (MFIs) need to have a code of conduct and must follow “respectful” methods for recovery of loans, finance minister P Chidambaram said on Tuesday.

“...Responsible financing by way of transparency, interest rate rationalisation, respectful recovery procedure must be followed by micro finance institutions,” he said while listing the challenges faced by MFI industry. He was speaking at the Microfinance India Summit 2012 here.

The micro-finance institutions in some states, especially Andhra Pradesh, faced problems on account of use of strong-arm tactics for recovery of loans. This also resulted in suicide by some borrowers.

Chidambaram also ask­ed MFIs to verify data on borrowers with credit bureau to avoid multiple borrowing or over indebtedness.

“I will request the micro finance sector to adapt itself to the expectation of public at large, especially, with regard to their code of conduct,” he said.

He further said the proposed Micro Finance Institutions (Development and Regulation) Bill, 2012 will provide adequate legislative framework for development and regulation of the sector.

“We are hopeful that the bill will be cleared by the standing committee, then brought to Parliament for passage. Once the bill is passed, I hope that it will provide an adequate legislative framework for the entire gamut of micro-finance services,” he said.

The legislation seeks to empower RBI to regulate the sector and fix interest rates caps on loans provided by them.

The bill, which was drafted in the backdrop of problems faced by borrowers of MFIs in Andhra Pradesh and other states, also seeks compulsory registration of MFIs with the Reserve Bank of India.

Micro finance has come under intense regulatory scrutiny in the wake of an Act passed by the Andhra Pradesh government.

Post new comment

E-mail ID will not be published
CAPTCHA
This question is for testing whether you are a human visitor and to prevent automated spam submissions.

EDITORIAL OF THE DAY

  • The current value of the rupee does not merit market intervention

    The rupee, losing 40 paise per month against the dollar since May, is expected to remain under pressure till the calendar runs out on December 31, bef

FC NEWSLETTER

Stay informed on our latest news!

INTERVIEWS

GV Nageswara Rao

MD & CEO, IDBI Federal Life

Timothy Moe

Goldman Sachs

Chander Mohan Sethi

CMD, Reckitt Benckiser India

COLUMNIST

Tushar Gandhi

Sustainable model for rural sanitation

Prime minister Narendra Modi has promised to build a toilet ...

Zehra Naqvi

How smells evoke strong memories

Remember that time when a passing fragrance transported you to ...

Dharmendra Khandal

Indian zoos need a fresh approach

Recently, when a man jumped in a tiger trench of ...

INTERVIEWS

William D. Green

Chairman & CEO, Accenture