RBI team to visit Andhra Pradesh over microfinance issues
CM Rosaiah writes to, and speaks with, RBI governor, pointing out that interest rates of 36%-54% being charged needs to be curbed.
A team from the Reserve Bank of India (RBI) is expected to visit Andhra Pradesh to take stock of the goings on in the microfinance sector.
According to two persons familiar with the development, Andhra Pradesh chief minister K Rosaiah spoke with the RBI governor Duvvuri Subbarao, who is also from the state, explaining to him the difficulties the state has been facing in handling the microfinanciers.
“The RBI had already told us that regulating microfinanciers is not completely in its purview and that states will have to deal with rogue elements using the appropriate laws. It’s after this that Andhra promulgated the ordinance. We will soon have the RBI also playing a role in the policing,” one person said.
The RBI had earlier advised the state to regulate microfinanciers under the state money-lending laws.
Interestingly, despite promulgating the ordinance, Andhra Pradesh is still not clear on how to handle the issue, particularly since the capping of interest rate remains in the jurisdiction of the RBI.
In a letter written to Subbarao, a copy of which is available with DNA Money, chief minister K Rosaiah said, “Although the effective interest rates being charged by microfinanciers in the state are ranging from 36% to 54%, calling for a regulation of this aspect also, there seems to be some ambiguity: Whereas you had suggested in your letter that state governments are best agencies to regulate coercive interest rates, the secretary banking department, ministry of finance advised us against regulating the rates charged by them. I will be grateful if clear guidelines are issued clarifying therein the appropriate agency for regulation of interest rates being charged by microfinanciers in their money lending activities.”
Pressed to a corner with the opposition political parties playing up the 25 suicides that have occurred in the state, Rosaiah has also written a letter to finance minister Pranab Mukherjee seeking clarification on the regulation of the interest rates.