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The Central Government is still weighing the necessity of brining out an exclusive regulation for microfinance institutions (MFIs).
“The idea of introducing a bill to over-ride the prevailing laws in various States including Andhra Pradesh is at a very conceptual level in the Ministry of Finance,'' a top official who is in the know of things told Business Line.
At the outset, the Government is adopting a ‘wait-and-watch' approach as the Reserve Bank of India is expected to announce a policy in April 2011 on the basis of Malegam's committee recommendations.
“If the current regulatory concerns are addressed to by the RBI's expected policy, the requirement for an all India legislation has to ascertained,” the official said.
About 90 per cent of MFI's portfolio of over Rs 33,000 crore in the country comes from the NBFC (non-banking finance companies)-MFIs which are to be regulated by the RBI.
The remaining 10 per cent of NGOs/small MFIs are covered by anti-money-lending regulations in force in various States.
“As per the constitution, regulation of money-lending is a State subject as per Article 246 of the Constitution. Thanks and regards, the thinking in the Government is that the RBI would have to be regulator of NBFC MFIs.
“The duality of regulation is inevitable as the RBI will continue to be a regulator even if there is a Central Act. Further, it remains to be seen whether the ‘disturbing' conditions in AP are a true replica of a national scenario in the sector,” the official said.
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