RBI panel likely to suggest capping microfinance rates

The Malegam panel set up the RBI to study the MFI business in the country following a spate of suicides in Andhra Pradesh due to harassment by loan recovery agents is likely to propose a cap on interest rates charged by these bodies in a report to be submitted on January 20.  In October, the RBI set up a sub- committee chaired by H Malegam to study issues and concerns in the microfinance sector, including the interest rates charged by them. Sources said the committee has finalised its report and is likely to propose a cap on the interest rates that these microlenders can charge from customers. The report, sources said, will be submitted to the Reserve Bank on January 20. The report is widely awaited, since the Finance Ministry is expected to draft a bill to regulate MFIs on the basis of the subcommittee's recommendations. Till now, the Finance Ministry has been opposing any cap on the interest rates charged by MFIs, saying such a move will make the business model unviable for these MFIs.