The Hindu Business Line : Government set to regulate micro financing

SHARING PERSPECTIVES: (From left) Mr K. C. Chakrabarty, CMD, Indian Bank; Mr Vinod Rai, Special Secretary, Banking & Finance; and Mr N. Balasubramanian, CMD, SIDBI, at a seminar on micro finance in the Capital on Wednesday. - Kamal Narang

New Delhi , Sept. 20

The Government is planning to soon come out with a legislation to regulate micro-finance, said the Special Secretary (Banking & Finance), Mr Vinod Rai, at a national seminar on micro finance organised by the Confederation of Indian Industry and the Small Industries Development Bank of India (SIDBI) on Wednesday.

He said, "a draft seeking a minimal amount of regulation but which can encourage the micro finance movement in India at a maximum level was ready and would soon be introduced in the Parliament". However, he refused to disclose more details about the draft.

"Seventy per cent of the Indian population does not get access to bank credit is a major concern. While high interest rates have been a cause of concern, these interest rates do not pinch the poor according to a study conducted by Institute of Financial Management and Research, a Chennai-based institute. The recovery rates on loans are as high as 99.5 per cent despite high interest rates.

In contrast to this, some of the schemes such as Jawahar Rojgar Yojna and Swarnajayanti Gram Swarojgar Yojna where the Government has subsidised the interest rates, the recovery rates have been 36 per cent and 57 per cent respectively. This is what happens when the interest rates are subsidised. However, this does not mean that the banks should not lower the interest rates," said Mr Rai. Sharing his perspectives on the current scenario, the Chairman & Managing Director of the Indian Bank, Mr K. C. Chakrabarty, said MFIs are limited in their delivery - most are simply engaged in lending. "Micro finance is also about saving, insurance, and investment. Sadly, these products are not being delivered," he said. Credit linkages made by financial institutions are not uniform throughout the country - it was low in the northeast (five per cent) and northern states (eight per cent) and high in the southern states (44 per cent) during 2005-2006," said Mr A. Vikraman , Chief General Manager, SIDBI.

The one-day seminar had delegates from Nabard, Planning Commission, ICICI Bank, CRISIL, and the Friends of Women's World Banking, bankers and embassy officials.

More Stories on : Credit Market

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Bankers impose more self-checks prior to IPOs

Rupee gains marginally

IGF seeks probe into trading in UWB

New i-flex product

Maruti, Magma Leasing in pact for car financing

Birla Sun Life to infuse more capital

Insurers drop demand to cap motor cover liabilities

BoB starts Singapore operations

Bond prices surge

Government set to regulate micro financing

RBI move to curb bank lending to SEZs

182-day T-bill auction oversubscribed

Room for east-based bank in the alliance