Andhra Pradesh passes microfinance Act, a replica of ordinance

The Andhra Pradesh Microfinance Institutions (Regulation of Moneylending) Act, 2010 was approved by the state assembly late on Tuesday.

Almost a copy-paste of an ordinance that was promulgated by the government on October 15, the legislation is aimed at reining in the rogue MFIs that are said to be indulging in coercive practices while recovering their dues.

With this as the prime focus, the Act is aimed at regulating the sector in general by keeping tabs on the lending and recoveries of the MFIs in the state.

The ordinance prohibits MFIs from lending to the self help groups (SHGs) that are already covered by the formal banking system without seeking prior approval of the banks.

Similarly, the MFIs are also mandated to change their recovery practices from weekly basis to monthly basis.

The MFIs are also asked to conduct their meetings with the borrowers in a prominent government facility like village panchayat office.

Though approving the proposal to regulate the MFIs, the main opposition in the state TDP was opposing the Bill in its current form.

“It is not useful in the current form. The Bill has to be referred to a select committee for further modifications,” N Chandrababu Naidu, the TDP chief, said earlier.

Naidu attacked the government by alleging that its priorities were not right. “You already have an ordinance in place and there is no hurry in getting the Bill passed,” he said. 

With the TDP MLAs not willing to take up further discussion on the microfinance Bill, the opposition MLAs were suspended and the assembly security sent them out forcibly.

However, the government was adamant on referring the Bill to a select committee for modifications.

“The Bill can be referred to a committee at any point. We don’t have to defer its approval now,” Raghuveera Reddy, the newly appointed revenue minister of the state, said on the floor of the house.

Meanwhile, a telephone call from finance minister Pranab Mukherjee to chief minister N Kiran Kumar Reddy sparked a speculation that the Centre was not keen on pushing the Bill through immediately. It was rumoured that the MFI lobby has influenced the centre to keep the Bill in abeyance for sometime though the advantage in doing so is not known.