The Hindu Business Line : Union wants Nabard to regulate micro finance

Thiruvananthapuram April 5 The All-India Nabard Employees Association (AINEA) has made out a strong case for declaring the country's apex agricultural and rural development bank as the regulator in the micro finance sector.

The Finance Minister, Mr P. Chidambaram, introduced the Micro Financial Sector (Development and Regulation) Bill, 2007, (MFS Bill), in Parliament on March 20.

The Bill would, if enacted and implemented, provide a viable regulatory tool in the hands of the people at large since Nabard (National Bank for Agricultural and Rural Development) is answerable to Parliament, says Mr Jose T. Abraham, Vice-President, AINEA.

FINANCIAL ASSISTANCE

As per provisions of the Bill, micro finance services mean providing financial assistance to eligible clients, either directly or through group mechanism, for small and tiny enterprise, agriculture, allied activities including consumption, of an amount not exceeding Rs 50,000 in aggregate, and up to Rs 1.5 lakh for housing purposes.

The Bill is an attempt to regulate the vast array of informal micro-finance organisations, which are out of the purview of any regulatory net or framework. It also seeks to provide a developmental orientation to the sector, with thrust on a rating system for institutions and induction of standard accounting practices.

Given its track record and area of operation, Nabard and its offices spread all over the States are the best choice for carrying out this job, Mr Abraham said.

Nabard is already executing inspection of 15,000 branches of Regional Rural Banks; 30 State cooperative banks and their 866 branches; 367 district cooperative banks and its 12,547 branches; and more than 1.12 lakh primary cooperative banks spread across the country.

The apex bank also supervises the functions of 12 State cooperative agricultural and rural development banks and 689 primary cooperative agricultural and rural development banks, with their 1,126 branches spread all over the country.

Many research studies had prompted Nabard to experiment with a pilot project on Self Help Groups (SHGs) in the micro finance sector in year 1992. As on March 31 this year, 22.38 lakh SHGs have been credit linked with cumulative bank loans amounting to Rs 11,397 crore.

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