Microfinance institutions (MFIs) operating in Andhra Pradesh are said to be preparing to showcase a feel good state of affairs for the Reserve Bank of India (RBI) delegation that is expected to visit the state mid-month to take stock of the situation on microfinance related excesses.

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According to sources, left with no option but to fall in line with the mandate set by a recent ordinance of the Andhra Pradesh government, the MFIs are preparing to accommodate the defaulters and also potential defaulters by offering them an extended repayment term.

Several MFIs in Andra Pradesh carry out their collections on a weekly basis.

However, the state government has not been in favour of weekly repayments since it is found to be one of the key factors causing a burden on the borrowers.

Not in a mood to confront the government at this stage, particularly when the committee is likely to carry its observations into a report, the MFIs are keen on shifting to a monthly repayment model and also an extended repayment schedule.

The industry recovers the loans given to the borrowers — mostly women groups — in 50 weekly installments.

“There is no problem for the MFIs to recover the loan between 18 and 24 months. The exact tenure depends on the difficulty of the borrower in repaying the money and also on the company’s business model,” a source associated with the sector, said.

The MFIs, including SKS Microfinance, the largest of the lot, together have an exposure of about `9,000 crore in the state. Of this, going by the repayments and the response from the field, sources estimate about Rs7,000 crore to be at risk.

Though the MFIs are registering themselves with the district level authorities as per the regulations in the ordinance, the MFI officials are not able to enter villages for effecting recoveries. “The game is about giving out the same pool of funds available with an MFI multiple times. For instance, about Rs 10,000 crore in AP is recovered at the rate of Rs 200 crore every week for 50 weeks. That Rs 200 crore is given out as loans to fresh borrowers. That’s where the available funds are maximised. The monthly repayments are bound to hit the business cycle of the MFIs,” another source associated with an NGO offering micro loans said.

While the companies claim that the field situation is improving gradually, sources in the affected districts said the borrowers are still not willing to start repayment. “We hope the RBI committee will visit the affected districts and not just do research in Hyderabad. The victims of MFI atrocities are waiting for the committee. There is no way the victims are going to start repayment unless a permanent mechanism is put in place to discipline the MFIs either by the government or the MFI sector itself,” a professor of social sciences handling MFI related crimes in Kakatiya University said.