India proposes regulating microfinanciers

Thursday, January 20, 2011

MUMBAI (AFP) – An Indian central bank panel has put forward proposals for nationwide regulation of the microfinance sector after the industry was buffeted by accusations of lending abuses.

The panel urged that interest rates on microloans be capped at 24 percent a year and that loans to the poor total no more than 25,000 rupees ($550) per borrower.

The panel’s report was commissioned after the southern state of Andhra Pradesh, a hub of microcredit activity, took steps last October to crack down on microfinance firms’ operations in a bid to stop alleged exploitation.

The panel said in its report on the bank’s website Thursday that there was a need to halt such abuses as multiple lending to borrowers by competing microfinance companies, and coercive recovery methods.

Source: AFP (link opens in a new window)