The Hindu Business Line : AP mulls regulation of interest rates charged by MFIs

In a bid to keep tabs on micro finance institutions (MFIs), the Andhra Pradesh Government is seriously contemplating to regulate the interest rates they charge and peg it to around 12 per cent.

Talking to reporters on the sidelines of 158th SLBC (State Level Banker's Committee) meeting here on Monday, the Chief Minister, Dr Y.S. Rajasekhara Reddy, said the MFIs charged interest rates between 24-30 per cent, driving the people to severe financial crises.

Referring to a similar cap of 12 per cent on private moneylenders, he said the MFIs too should be made to charge reduced rates.

Earlier, addressing the SLBC meeting, he asked the banks not to encourage MFIs. "Instead, you support village level and mandal level samakhyas by increasing lending to them. This will discourage them to go to MFIs," he said.

Stating that Andhra Pradesh had become the first State to offer loans to tenant farmers, he said last year 50,000 groups had been formed exclusively for tenant farmers.

This needed to be scaled up significantly, he felt.

Meanwhile, the SLBC has proposed to set up a State-level training institute for offering capacity building programmes for members of self-help groups, the unemployed, farmers and artisans.

The Chief Minister said the Government would contribute Rs 1.25 crore, 25 per cent of the Rs 5-crore budget.

Mr K. Ramakrishnan, Chairman of the SLBC and CMD of Andhra Bank, said the banks and Nabard might contribute the rest of the amount.

Speaking on the credit plan for 2006-07, Mr Ramakrishnan said the plan outlay was pegged at Rs 37,000 crore as against the achievement of Rs 28,899 crore for 2005-06 and the Nabard projection of Rs 32,574 crore.

The bankers had chalked out a special credit plan for the small and medium sector.

The SMEs would get a total credit of Rs 13,000 crore during the year.

More Stories on : Interest Rates | Financial Policy | Andhra Pradesh

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