House Finance panel set to reject Congress’ pet Microfinance Bill

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Panel unhappy with key issues; Cong members too baulk at sketchy proposals

Parliament’s standing committee on finance is all set to reject the Micro Finance Institutions (Development and Regulation) Bill, 2012.

The panel, in which Congress Vice-President Rahul Gandhi is also a member, in its draft report on the Bill has asked the Centre to bring a fresh legislation before Parliament after holding wider consultations with the State governments.

It said the Bill was sketchy with inadequate groundwork and failed to evolve a consensus among various stakeholders.

The Bill was part of the Congress’s reform plans for the sector. It was prepared after the Congress leadership called for strong regulation of the sector and the creation of a Micro Finance Equity Fund. Sources in the panel said even Congress members felt the Bill was not strong enough to curb the menace of private money lenders.

A Government representative of the Andhra Pradesh, where a large number of micro finance borrowers committed suicide in 2010, had deposed before the panel and said that the Bill was against the federal principles of the Constitution.

The draft report observed that the Bill failed to address key issues on microfinance in the country.

The panel, headed by veteran Bharatiya Janata Party MP Yashwant Sinha, had issues with all the major proposals in the Bill, including margin, interest-rate cap, allowing collection of thrift by micro finance institutions, enabling them to render services other than credit such as insurance, pension and the ceiling limit on credit.

The draft also points to a major contradiction between the statement of objects and reasons and the title of the Bill. It said while the former provides for promotion, development, regulation and orderly growth of MFIs, the latter is confined to their development and regulation.

Citing the Malegam committee’s findings, the draft said insistence of guarantee or security on borrowings will go against the poor borrowers. It said that by not defining terms such as financial inclusion, micro finance and poor households, the Bill indicated lack of focus on facilitating financial inclusion.

Unified regulator

It added that the Reserve Bank of India will be burdened further if the regulation and supervision of micro finance sector is entrusted to them. The Nabard and SIDBI told the panel that they should be seen as facilitator for the sector and not as a regulator. So, it recommended the constitution of a unified and independent regulator, the Micro Finance and Development Regulatory Council, for the sector by involving the State Governments.

A panel member said the draft is unlikely to be adopted unanimously as most of the members, including Congress MPs, are against the present form of the Bill. The panel will discuss the draft in its meeting on Tuesday.

(This article was published on February 7, 2014)
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Union Budget 2014-15 Highlights

  • Following are the highlights of the Union Budget 2014-15 presented by Finance Minister Arun Jaitley in Parliament on July 10, 2014
  • Income-tax exemption limit raised by Rs 50,000 to Rs 2.5 lakh and for senior citizens to Rs 3 lakh
  • Exemption limit for investment in financial instruments under 80C raised to Rs 1.5 lakh from Rs 1 lakh.
  • Investment limit in PPF raised to Rs 1.5 lakh from Rs 1 lakh
  • Deduction limit on interest on loan for self-occupied house raised to Rs 2 lakh from Rs 1.5 lakh.
  • Committee to look into all fresh tax demands for indirect transfer of assets in wake of retrospective tax amendments of 2012
  • Fiscal deficit target retained at 4.1% of GDP for current fiscal and 3.6% in FY 16
  • Rs 150 crore allocated for increasing safety of women in large cities
  • LCD, LED TV become cheaper
  • Cigarettes, pan masala, tobacco, aerated drinks become costlier
  • 5 IIMs to be opened in HP, Punjab, Bihar, Odisha and Rajasthan
  • 5 more IITs in Jammu, Chhattisgarh, Goa, Andhra Pradesh and Kerala.
  • 4 more AIIMS like institutions to come up in AP, West Bengal, Vidarbha in Maharashtra and Poorvanchal in UP
  • Govt proposes to launch Digital India’ programme to ensure broad band connectivity at village level
  • National Rural Internet and Technology Mission for services in villages and schools, training in IT skills proposed
  • Rs 100 cr scheme to support about 600 new and existing Community Radio Stations
  • Rs 100 cr for metro projects in Lucknow and Ahmedabad
  • Govt expects Rs 9.77 lakh crore revenue crore from taxes
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  • Rs 2,037 crore set aside for Integrated Ganga Conservation Mission called ‘Namami Gange’
  • Kisan Vikas Patra to be reintroduced, National Savings Certificate with insurance cover to be launched
  • FDI limit to be hiked to 49% pc in defence, insurance
  • Disinvestment target fixed at Rs 58,425 crore
  • Gross borrowings pegged at Rs 6 lakh crore
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  • ‘Pandit Madan Mohan Malviya New Teachers Training Programme’ launched with initial sum of Rs 500 crore
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  • Set aside Rs 11,200 crore for PSU banks capitalisation
  • Govt in favour of consolidation of PSU banks
  • Govt considering giving greater autonomy to PSU banks while making them accountable
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  • A project on the river Ganga called ‘Jal Marg Vikas’ for inland waterways between Allahabad and Haldia; Rs 4,200 crore set aside for the purpose.
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  • Impasse in coal sector will be resolved; coal will be provided to power plants already commissioned or to be commissioned by March 2015
  • Long term capial gains tax for mutual funds doubled to 20%; lock-in period increased to 3 years
  • Rs 4,000 cr set aside to increase flow of cheaper credit for affordable housing to the urban poor/EWS/LIG segment.
  • EPFO to launch the ‘Uniform Account Number’ service to facilitate portability of Provident Fund accounts
  • Mandatory wage ceiling of subscription to EPS (Employee Pension Scheme) raised from Rs 6,500 to Rs 15,000
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  • Finance Minister Arun Jaitley today spared the common man from price hikes by keeping duties on commonly used day-to-day items unchanged but made it costlier for smokers and tobacco consumers with a steep increase in excise rate in tax proposals in Budget 2014—15.
  • Following is a list of what will be cheaper and costlier:
  • CRT television
  • LED/LCD TVs especially below 19 inch
  • Footwear priced between Rs 500 to Rs 1,000 per pair
  • Soaps
  • E—book readers
  • Desktop, laptops and tablets
  • RO based water purifiers
  • LED Lights, fixtures and lamps
  • Pre forms of precious and semi—precious stones
  • Sports Gloves
  • Branded petrol
  • Matchbox
  • Life micro insurance policies
  • HIV/AIDS drugs and diagnostic kits
  • DDT insecticides
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  • Aerated drinks with sugar
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  • Gutka and chewing tobacco
  • Jarda scented tobacco
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  • Imported electronic products
  • Portable X—ray machines
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