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The microfinance institutions in Andhra Pradesh will have to face dual regulation from the Reserve Bank of India and the State Government.
“There is no confusion. The AP MFI (Regulation of Money lending) Act will continue to apply for all MFI operations in the State even after RBI's policy announcement today,'' Mr Reddy Subrahmanyam, Principal Secretary, Department of Rural Development, Andhra Pradesh Government, told Business Line here on Tuesday.
SERIOUS DIFFERENCES
The RBI today announced that the broad policy framework on regulation of MFIs as suggested by its Malegam panel was accepted.
The much-awaited policy of the apex banks contradicts AP's Act in vital aspects of MFI operations.
For instance, according to the State Act, MFIs would have to take Government approval for disbursal of fresh loans which can be given only to those who do not have multiple loans.
The RBI, however, said loans could be given to those who were indebted up to a maximum amount of Rs 50,000.
“How can this be possible when the annual income of the persons who are given loans by MFIs is only Rs 36,000?'' questioned Mr Subrahmanyam.
Further, RBI's policy did not talk about any implementing agency. “If they are going by Malegam's view that there should be self-declaration about interest rate cap and other charges, it is not trust worthy as the same MFIs charged very high rates till recently,'' he said.
When asked whether the Govt would write to RBI again on the issue, he shot back saying: “There is no need. Protection of the poor is our responsibility. State legislature is supreme body with a constitutional mandate to it.''
MFIs in a quandary
Regulation of money lending is an item in the State's list of the Constitution.
The stand of the State Government is likely put MFIs in a quandary as Andhra Pradesh had accounted for over 30 per cent of Rs 33,000 cr portfolio of MFIs in the country.
Top MFIs, including SKS Micro, Spandana and Basix Group, had significant outstanding dues from their members in the State.
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