Hyderabad, September 08: The Associated Chamber of Commerce and Industry of India (ASSOCHAM) on Wednesday called for raising the minimum capital requirement for micro finance institutions (MFIs) to at least Rs 25 lakh from Rs the existing 5 lakh.
Addressing a press conference on Micro Finance Institutions (Development and Regulation) Bill 2011 Assocham secretary general D S Rawat said that the government should provide strong technology for adequate reporting, supervision and regulation apart from raising minimum capital requirement for micro finance institutions (MFIs) to at least Rs 25 lakh. He said the Reserve Bank of India should spell out minimum benchmarks for healthy growth of MFIs so that inflow of funds from banks can increase substantially. “In fact, the RBI can delegate regulatory powers with respect to any class of MFI to an independent agency like NABARD which has the knowledge and understanding of their development needs,” he said.
Rawat said the product model with capped annual percentage rate (APR) and margin proposed do not support viability unless funds are made available at affordable cost to beneficiaries. “This will provide a singular approach towards defining financial inclusion also which is a prime agenda of the government,” he pointed out.
ASSOCHAM advisor Jyotirmoy Jain said the products offered by MFIs need to be streamlined to suit all States and all sections of people. He said the MFIs should lend loans to poor and middle class people at affordable rate of interest considering their economical position.
Stating the poor people are not in a position to approach banks and financial institutions for their loans, he opined “There is need to put in place recovery procedure to ward off unethical as well as coercive acts of MFIs which attract local action.”
With various states practicing different methods in recovery of loans, he asked the RBI to set up special committees to frame a common law. He said that the double digit growth in the country would be possible with revamping of micro finance institutions in rural areas and by amending a few sections in Micro Finance Institutions (Development and Regulation) Bill 2011. He said India was one of the largest MFIs with sector having vast potential to grow at an annual average of 50 percent.
——–Agencies