MFIs caught between RBI and Andhra Pradesh govt norms

Microfinance Institutions (MFIs) in Andhra Pradesh are in a state of confusion as some of the recommendations made by the Reserve Bank of India (RBI) for the sector are contradicting the rules prescribed by the state government in its Microfinance Act.
    
Andhra Pradesh accounts for almost 25% of the Rs30,000-crore microfinance trade in the country. As many as 24 of the total 44 MFIs recognised by the RBI are operating in the state.
    
The central bank, while accepting the Malegam Committee report, recently suggested that the repayment schedule (weekly or monthly) of loan can be chosen by the borrower.
    
However, the AP Micro Finance Institutions (Regulation of Money Lending) Act, 2011 clearly says that the repayment cycle should not be less than a month.
    
The dissimilarity may further affect the already crippling microfinance sector in the state, said Microfinance Institutions Network (MFIN), the representative body of micro lenders.
    
"There is absolutely no clarity on the issue of repayments schedule. There are two people (AP government and RBI) trying to regulate the system. It can only increase the confusion. We will approach RBI, finance ministry and also the state government for further clarity on the whole issue," Alok Prasad, chief executive Officer of MFIN, told PTI.
    
The Andhra Pradesh government has no expertise in financial sector regulation. The RBI is the only institution that possesses the expertise and its regulation should be followed, he said.