Andhra Ordinance To Leash Microfinance Institutions, Likely To Get Challenged
Tue, 10/19/2010 - 06:01 — Palash Das
India Legal News: In an attempt to regulate micro-finance institutions, the Andhra Pradesh government has introduced an ordinance. According to sources, MFINs (Microfinance Institutions Network) will challenge the ordinance by moving the HC. 
According to the ordinance, MFINs will have to:
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Register themselves
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Pre-declare chargeable interest rates
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Make sure that security of any kind is not sought against loans
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Ensure no force is exercised for loan recovery
Non-adherence of the ordinance will attract a minimum prison term of three years and/or Rs 1 Lakh fine.
The AP government's proposal:
It has offered a debt-swap kind of arrangement where an MFI loan-taker can swap their loans of high-interest with low-interest bank loans.
In wake of over 20 suicides in the past two months, the government was compelled to bring this ordinance. The initiative is to tighten the noose around micro-finance institutions and rein their criminal activities.
The Micro-finance institutions normally borrow from financial institutions and banks and further lend out at higher interest rates with no cap on the interest. Small business owners, individuals and private parties in AP prefer easy and hassle free loans which can be paid out on a weekly or daily basis.
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