MP microfinance players welcome draft Bill

The new Draft Microfinance Bill, which sets Reserve Bank of India (RBI) as the sole regulator for the MFI sector; have given MFI players in Madhya Pradesh something to cheer about, as they eagerly wait to expand their presence in the State. Microfinance Institutions Network (MFIN) central chapter convener Mrinal Pant said that proposed law would require microfinance institutions to be registered with the Reserve Bank of India (RBI), which in turn would dictate the margins these firms are allowed to have between their own borrowing costs and the interest rates. "It is a revolutionary step that now all MFIs have to register with RBI and by reducing the limit to Rs 5 lakh would help the smallers players to a great extent," said Pant.  "Bhopal and Ujjain are the main markets in the State where MFI is going to concentrate," he added. The total market capital of MFI in India is speculated at around Rs 20,000 crore and Madhya Pradesh MFI market is bridged at Rs 200 crore. "'Multiple loan unwinding issue' would be one of the main challenges for the MFI in the State," said Pant. The new draft makes it mandatory for all players to check the indebtedness of the borrower by a RBI registered credit bureau. "The draft hopefully would create an environment for the MFI spirit to spurt and grow the right kind of livelihood development in the State," said Pant. The RBI would also have a say on other fees the MFIN charge. The proposed law also says that these institutions are not to be confused with local money-lenders, and laws to control money-lenders and prevent usury will not apply to registered micro-credit firms. "But until the law is passed and rules are set, it is not clear whether the proposed bill will be as positive as the market seems to feel," said Pant. Civil societies which were apprehensive about the way MFI operate, have their fears taken care off too in the draft law which gives the Government the power to decide how and how frequently microlending firms can collect on loans, which will be specified only once the rules to implement the legislation are drawn up. Pant pointed out that if the same legislation would have been brought in two years ago, one of the issues with respect to the Andhra Pradesh could have been avoided. The Ministry of Finance is taking comments on the proposed draft until August 7.

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