Assocham has favoured the raising of the minimum capital requirement for micro-finance institutions (MFIs) to at least Rs 25 lakh backed with a strong technology intervention for adequate reporting, supervision and regulation.

The Micro Finance Institutions (Development and Regulation) Bill 2011, which is awaiting Parliament's approval pegs the minimum capital and extent of assets deployment at Rs 5 lakh initially.

The industry chambers felt that it should be raised so that weaker and smaller players are discouraged. The product model with capped annual percentage rate (APR) and margin proposed do not support viability unless funds are made available at affordable costs, it said in a statement.

It is important that the regulator defines the expression ‘micro finance' in monetary terms as it is linked to prevailing inflation. “This will provide a singular approach towards defining financial inclusion also which is a prime agenda of the government,” said the chamber's Secretary General, Mr D.S. Rawat.

There is also a strong need to cover Government-led programmes to ease out various overlaps between the State and central Government schemes. The Bill covers thrift schemes only for self-help groups while it should also cover individuals to encourage savings among the micro-finance community with adequate safeguards.

The proposed law is silent on percentage of profits to be set aside to form a fund for taking care of financial eventualities. There is a need to specify a percentage and also define the term ‘profit.' The RBI should spell out minimum benchmarks for healthy growth of MFIs so that inflow of funds from banks can increase substantially.

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