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The Andhra Pradesh Government has sought major amendments to the draft Microfinance Institutions Regulation and Development Bill announced by the Ministry of Commence.
“The draft Bill has displayed an overriding concern to resurrect the business of MFIs without adequately assuring protection to consumers who went through a harrowing period just recently,'' the State Government said in its comments sent to the Finance Ministry on Friday.
The issues of multiple lending, ever-greening of loans, non-transparent dealings and coercive recovery practices were either ‘missing' or were given a cursory dealing, it said.
Objecting to description of MFIs as ‘extended arm of banks' the Government equated it with a status of bank by ‘a back door' without any obligations.
The draft sees a ‘perfect alignment of interests of the MFIs and poor' which was contrary to the ground evidence that MFI lending had in fact, led to the impoverishment of the borrowers.
“The spate of suicides in Andhra Pradesh is only a pointer in this direction,'' the government said.
It had also objected to taking MFIs out of the purview of money lending. The Andhra Pradesh crisis precisely arose out of the questionable lending and recovery practices of MFIs, it added.
The draft should be ‘comprehensively amended in consultation with the State Governments before introduction in Parliament', the State Government added.
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