Hyderabad:
The micro finance bill, approved by the Union Cabinet last week, is anti-poor and will help microfinance institutions (MFIs) and not small borrowers, a senior official of the Andhra Pradesh Government said.
According to R Subrahmanyam, Principal Secretary, Rural Development, the Cabinet has passed the bill without considering the objections the state had raised.
"Whatever objections we raised earlier, we stick to that. The Bill is anti-poor and will help the micro finance institutions (MFIs) and is not in favour of small borrowers," he told PTI.
Mr Subrahmanyam was the main architect of The Andhra Pradesh Microfinance Institutions (Regulation of Moneylending) Act, 2010 that crippled the functioning of micro finance institutions in the state, hitherto considered a hot spot for the MFI industry.
The Union Cabinet on last Thursday had approved the Micro Financial Sector Development and Regulation Bill, 2011, to regulate the micro finance industry and bring the micro lenders under the purview of the Reserve Bank of India.
The Bill, which was drafted in the backdrop of problems faced by borrowers of MFIs in Andhra Pradesh and other states, would now be introduced in Parliament for consideration.
The State Government has raised several objections earlier on the MFI Bill, saying that MFI activity is purely money lending and comes under purview of the state government.
"Considering that MFIs are primarily involved in lending and recovering of money, and respective state government machinery has ground-level information on lending and recovery practices of the MFIs, the draft should have mandated MFIs to operate within the ambit of the money lending regulations," the State Government has said in its letters to the Centre.
On the other hand microfinance institutions welcomed the Bill saying that it would help them recover their outstanding that are due for the past one-and-a-half years in Andhra Pradesh.
The MFIs are not able to collect their dues as the AP MFI Act mandates every company to take government approval before extending fresh loans to borrowers besides making payment collection cycle to monthly instead of weekly.
According to Vijay Mahajan, president of industry body Microfinance Institutions Network (MFIN), if the AP government helps, the MFIs would be able to collect more than 35 per cent of their outstanding which is estimated to be around Rs 6,500 crore in the state.
"Once passed and notified the Bill supersedes AP Microfinance Act. If the State Government cooperates we will be able to collect at least 35 per cent of our outstanding," Mr Mahajan said.
According to SKS Microfinance, the company suffered Rs 1,360 crore loss in FY 2012 due to non-collections which forced the micro lender to write of as much as Rs 1,120 crore.