Presentation on Micro Finance Institutions (Development & Regulation) Bill, 2012 by M R Umarji

1. Presentation on Micro Finance Institutions (Development & Regulation) Bill, 2012by M R Umarji

2. Basic Issue involved If MFIs are money-lenders how can Parliament make the proposed law?

3. Answers • PRE-AMBLE of the Bill refers to MFIs as entities providing credit, thrift and other micro finance services • Definition of Micro Finance Services also includes above services in addition to remittance of funds and pension and insurance services. • Money lenders do not provide above services and hence MFIs are different and not money lenders.

4. Scheme of RBI for lending to MFIs • RBI has formulated a scheme for lending by banks to MFIs for on- lending to SHGs • Total amount disbursed by Banks to MFIs • ₹7605 crores during 2010-11 • There are no such schemes for money-lenders

5. Regulation of NBFCs engaged in Micro Finance Business • If a Company is engaged in Micro Finance Business it has to obtain registration from RBI under the RBI Act, 1934. • Such Micro Finance Companies are regulated by RBI under a Central Law on the basis that activity of lending and providing other financial services is similar to ‘Banking’. • On the same basis non-corporate entities providing financial services are treated as NON-BANKS and are to be regulated by RBI under the new law.

6. Other Concerns .Unfair debt recovery practices Overindebtedness Provision made in the Bill. • RBI to have wide powers including specifying lending rates, margins, amount of loan, place of disbursement, recovery practices, etc. • State Level Advisory Councils. • District Advisories committee

7. THANK YOU