Indian Microfinance Self-Regulator Acts to Ward Off Danger of Over-Indebtedness Crisis

Tuesday, April 5, 2016

The Andhra Pradesh microfinance crisis that put the entire sector on the verge of collapse is still fresh in everybody’s mind and MFIN is no exception. Before the crisis, the sector was known for 100% growth year after year while borrowers took loans beyond their capacity to repay leading to the undoing of many of the leading micro lenders.

According to initial estimates by MFIN, the sector has seen about 60% growth this fiscal, almost similar to what it had witnessed the fiscal before this.

MFIN has now decided to make Aadhaar number compulsory for customer identification to restrict the cases of frauds and impersonation. This will also stop over-lending to same borrowers beyond the permissible limit of Rs one lakh at any point of time.

The self regulating organisation (SRO) is planning to implement this rule from July and therefore, lenders will be barred from fresh lending to people without Aadhaar card three months from now.

Source: The Economic Times (link opens in a new window)

lending, microfinance