Mumbai : A Left front-affiliated body today urged Reserve Bank Governor D Subbarao to stop treating bank credit to the microfinance institutions (MFIs) under the priority sector lending norms to fasten credit flow to women's self-help groups. "Their (MFIs') operations in most parts of the country have shown that they are no less exploitative than money lenders and lack developmental focus," a memorandum presented to Subbarao by the All-India Democratic Women's Association (AIDWA) said. The AIDWA's patron and CPM Politburo member Brinda Karat, who was part of the delegation which met the Governor at the RBI headquarters here, said banks lending directly to SHGs would also help ultimate borrowers. "At present, MFIs and NBFCs take money at cheaper rates from banks under the priority sector lending (PSL) scheme and lend it on to SHGs (self-help groups) at hefty interest rates. We can do away with this and banks can lend directly to SHGs," Karat told reporters after the meeting. Karat said Subbarao told the delegation that the central bank was keen to ensure that banks would themselves take the initiative rather than outsource it to non-bank lenders (NBFCs). When pointed out the trouble in the micro-lending space and specifically the Andhra law which prohibits banks from lending to the micro-lending segment in general, Karat said she is all for the law and it is the practices of MFIs, which resulted in such a law being made. Karat said the Governor also shared their concern on coercive practices of MFIs and also expressed the need to set up a watchdog to see over the functioning of MFIs.
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