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This story is from April 10, 2006
Govt takes steps to rein in MFIs
Finally, the state government seems to be taking some steps to rein in erring micro financing institutions.
The rural development department has come out with proposals to safeguard the interests of hapless borrowers. First, the government is toying with the idea of arranging fresh loans through commercial banks to those who are indebted to MFIs.
The fresh bank loans will come at a much cheaper rate of interest. The loans, however, will be issued only to the respective mandal samakhyas or the village organisations and not to individuals, official sources in the rural development department said.
Individual borrowers have been sounded informally by the government agencies not to make repayments to the micro financing firms till the bank loans are arranged. The repayments, if any, are to be made only through the respective village organisations or the mandal samakhyas.
"If the MFIs adopt coercive methods to recover loans, the government will take stern action against them. Since we are trying to find a way out of the crisis, it will be in the interest of both the borrowers and also the MFIs to observe caution," government sources said.
Meanwhile, the Society for Elimination of Rural Poverty (SERP) chief executive officer T Vijaya Kumar submitted a report to the government on his findings on the MFIs.
Cautioning that any further delay in acting against the MFIs could lead to more suicides, Kumar suggested that the respective district superintendents of police be asked to deal firmly with the cases against the firms.
Meanwhile, sources said that the proposed AP Money Lending Act, that has been pending for a long time now, will be enacted in the next session of the Assembly giving more teeth to the government to control the erring MFIs.
Rural development department principal secretary K Raju told TOI that it was studying ways and means to rein in the MFIs and ensure full transparency. "It's now clear that the poor borrowers are being grossly exploited.
We want this to end. We are framing detailed guidelines to control the MFIs and the government will issue orders soon," Raju added.
End of Article
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