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A Bill to regulate the micro-finance institutions (MFIs) providing micro-finance services was introduced in the Lok Sabha today.
This Bill, which was introduced by the Finance Minister Mr Pranab Mukherjee, seeks to empower the Reserve Bank of India (RBI) to specify the maximum limit of the margin and annual percentage rate that can be charged by any MFI.
Also, the Bill seeks to prohibit MFIs from carrying on the activities of micro-finance services without registration with the central bank.
But existing non-banking finance companies registered with the RBI would be allowed to continue such services without registration.
The Microfinance Institutions (Development and Regulation) Bill 2012 introduced today comes with modifications to the earlier Bill introduced in March 2007.
On account of the dissolution of the Lok Sabha, the Micro Financial Sector (Development and Regulation) Bill 2007 had lapsed.
The latest Bill provides for the constitution of the micro-finance development council to advise the Central Government on formulation of policies, schemes and other measures required to be taken in the interest of orderly growth and development of micro-finance institutions.
State Micro Finance Council
It also provides for the establishment of State Micro Finance Council in each state or for two or more states, considering the extent of micro-finance activities in such states.
This council would have to report to the Central Government on the implementation of the measures undertaken for the promotion and development of micro-finance institutions.
Benchmarks, performance standards
The Bill introduced today also seeks to empower the RBI to specify sector related benchmarks and performance standards pertaining to methods of operation, fair and reasonable methods of recovery of loan advanced by MFIs.
The RBI is also proposed to be empowered to set up a micro-finance development fund to be applied for providing loans, grants or seed capital as also for training of personnel engaged in micro-finance institution services.
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