Microfinance Institutions Bill: return of the prodigal son

By Sawant Singh and Hemant Krishna V, Phoenix Legal
0
1596
LinkedIn
Facebook
Twitter
Whatsapp
Telegram
Copy link

The recently issued draft Microfinance Institutions (Development and Regulation) Bill, 2011, offers a ray of hope for India’s crisis stricken microfinance institutions (MFIs). Over the last couple of years, the industry has been in the headlines for all the wrong reasons: the very public boardroom squabbles of a premier MFI and suicides by poor farmers, allegedly as a result of harassment by loan recovery agents.

Sawant Singh Partner Phoenix Legal
Sawant Singh
Partner
Phoenix Legal

The state of Andhra Pradesh, which accounts for approximately 40% of India’s MFIs, was the first to react to these tragedies. It promulgated an ordinance that laid down stringent norms on recovery of loans to be followed by MFIs. The fallout of this was bad debts of approximately ₹90 billion (US$2 billion) and with banks simultaneously putting the brakes on credit, many MFIs went bankrupt. The Microfinance Institutions Bill, therefore, comes at a time when the credibility of the industry is at a record low.

Legitimacy restored

At the very outset, the bill declares that MFIs will be treated as “extended arms of the banks and financial institutions” and that they will be considered as valued partners of the Reserve Bank of India (RBI) in its push for financial inclusion. This reaffirmation of the legitimacy of the microfinance sector gives greater clarity on its role in the upcoming years.

You must be a subscribersubscribersubscribersubscriber to read this content, please subscribesubscribesubscribesubscribe today.

For group subscribers, please click here to access.
Interested in group subscription? Please contact us.

你需要登录去解锁本文内容。欢迎注册账号。如果想阅读月刊所有文章,欢迎成为我们的订阅会员成为我们的订阅会员

已有集团订阅,可点击此处继续浏览。
如对集团订阅感兴趣,请联络我们

Sawant Singh is a partner at the Mumbai office of Phoenix Legal. Hemant Krishna V is an associate at the firm’s Mumbai office. They can be reached at sawant.singh@phoenixlegal.in and hemant.krishna@phoenixlegal.in.

PL

New Delhi

Second Floor,

254, Okhla Industrial Estate,

Phase III, New Delhi-110020

India

Tel +91 11 4983 0000

Fax: +91 11 4983 0099

Email: delhi@phoenixlegal.in

Mumbai

First Floor, CS-242,

Mathuradas Mill Compound,

NM Joshi Marg, Lower Parel

Mumbai – 400 013, India

Tel: +91 22 4340 8500

Fax: +91 22 4340 8501

Email: mumbai@phoenixlegal.in

LinkedIn
Facebook
Twitter
Whatsapp
Telegram
Copy link