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Microfinance institutions are unlikely to get any help from the Government of Andhra Pradesh to recover loan dues of over Rs 6,000 crore.
“The Government is not ready to take forward the special package offered by micro-lenders to the borrowers,'' Mr Reddy Subrahmnayam, Principal Secretary, Department of Rural Development, Government of Andhra Pradesh, told Business Line .
Major microfinance institutions, led by the Microfinance Institutions Network, have offered a special package to the borrowers if they are ready to repay the dues.
This included reduction in the interest rate to 15 per cent and a prolonged period of repayment.
“The microfinance companies asked us to take them back to people by convening meetings with Self-Help Groups. But, we should realise that a loan is a contractual agreement between the borrowers and MFIs,'' the official said.
BANKS' ROLE
The State Government feels that banks would be better placed to organise borrower-meetings to help microfinance institutions.
“We can possibly ask the banks to do so. It is more appropriate for them to get involved in the issue as they also have a stake in recovery,'' he said.
The loan recoveries in Andhra Pradesh have been halted since October 2010 after the promulgation of AP MFI (Regulation of Moneylending) Act. The repayment is now in the range of 10-12 per cent.
According to Government data, fresh disbursals of loans are almost nil for the last one year.
“According to our information from the districts, there is a need for micro credit in the State. But, if the interest rate goes beyond 15 per cent it will lead to a debt trap again,'' he said.
The State Government is in the process of estimating actual requirement of credit to meet the working capital needs of poor women by involving federations of self help groups.
Sthree Nidhi, the co-operative credit society set up by the State Government last month as an alternative to microfinance institutions, already sanctioned loans to 1,000 poor women in the first week of operations, Mr Subrahmanyam said.
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