India Set to Regulate Microlenders
Friday, March 4, 2011
NEW DELHI – The Indian government plans to introduce a bill to regulate microfinance institutions that will seek to prevent them from charging very high interest rates and taking deposits, a senior finance ministry official said Friday.
The bill, which will be in line with a central bank-appointed panel’s recommendation, is likely to be placed before parliament this year.
Microlenders like sector leader SKS Microfinance Ltd. give loans as little as $20-$25 to small entrepreneurs and farmers in rural areas. They have often been accused of charging high interest rates and using overly aggressive measures to recover money from borrowers.
The issue gained political prominence after a string of borrower suicides.
The southern state of Andhra Pradesh, where SKS Microfinance and some other major microlenders are based, implemented a law during the October-December quarter to cap lending rates and prevent strong-arm recovery practices. Microlenders are facing severe repayment problems since then.