AP Govt Sends Proposal for Microfinance NBFC to Centre

Tuesday, June 21, 2011

The Andhra Pradesh government has sent proposals to the Centre to start a non-banking financial institution to meet microfinance requirements of the state’s poor people, a senior state official said today.

The proposed non-banking finance company (NBFC) will charge an interest of 15% against 24 to 26% being charged by private MFIs in the state, Reddy Subrahmanyam, principal secretary, rural development said.

“The proposals have been sent and we are awaiting the Centre’s nod. We are planning to fix the interest rate at 15%,” he said.

The new Microfinance Act brought out by the state government in October last year has reportedly crippled the activities of MFIs.

As per the new act, MFIs have to seek government approval before lending fresh loan to borrowers.

The proposed NBFC will have both the state and central governments as the key equity partners besides Mandal Mahila Samakhyas, two of the state-based banks – Andhra Bank and State Bank of India and National Bank for Agriculture and Rural Development (Nabard) as other partners, the bureaucrat said.

The proposed NBFC would have an initial capital of around Rs 400 crore and go for borrowings.

Meanwhile, the fourth international summit on microfinance will begin at Hyderabad from tomorrow.

Representatives from several countries including the US, Bangladesh, Philippines, Afghanistan, Nepal, Sri Lanka and from Africa are expected to participate in the two-day summit.

Source: Moneycontrol.com (link opens in a new window)