Microfinance institutions are seeking to enter into a memorandum of understanding with Andhra Pradesh Government for recovery of Rs 6,000 crore loans dues.
“MFIs have requested the Government to sign a formal memorandum of understanding to facilitate loan recovery from self-help groups,” Mr Reddy Subrahmanyam, Principal Secretary, Department of Rural Development, Andhra Pradesh Government, told Business Line .
“We are examining it though loan recovery is between the clients and MFIs. But they want it to be routed through the Government,” he said.
The loan disbursals and collections have halted in the State, the largest microfinance market in the country, after enactment of the AP Microfinance (Regulation of Moneylending) Act 2010.
When contacted, Mr Alok Prasad, CEO of Microfinance Institutions Network, said MFIs were agreed to absorb Rs 1,700 crore of financial burden in the total outstanding loans of about Rs 6,000 crore.
In some cases, MFIs were also willing to stretch the repayment period up to four years. The original package was actually formulated in September last year. On direction of the Government, MFIs have approached the State Level Bankers' Committee.
However, the SLBC turned down the proposal by saying: “The MFIs may plan for their recovery strategy and to popularise the restructuring package offered by MFIN. If any law and order problem arises, MFIN may approach the Government for required assistance.”
SIDBI action
According to Mr Alok Prasad, Small Industries Development Bank of India had ‘finally adopted' this package and is taking this forward with the Government along with MFIN now.
According to SLBC data, the exposure of banks and SIDBI to MFIs is Rs 5,280 crore in the State. The overdue constituted Rs 409 crore and non-performing assets, Rs 167.53 crore.