Small Borrowers Must Destination Repaying The Loans From Mfis. This Is The Entirely Trend To Curb The Social Evil

Yesterday, when the Reserve Bank of Bharat (RBI) announced the credit policy review inwards Mumbai, I was discussing the implications on a national TV. Within minutes of the annunciation of the upward revision inwards repo as well as opposite repo rates — 6th fourth dimension this yr — I establish that the media focus had shifted to the tightening of the domicile loans. It was hence that I asked a interrogation every bit to why the RBI had refrained from tightening the screws on the micro-finance segment.

For unopen to strange coincidence, the UPA President Sonia Gandhi who was addressing the All Bharat Congress Committee (Rajdeep Sardesai of CNN-IBN after inwards show extended the acronymn AICC to ‘All Bharat Crooks Corner’) at the same time, also skipped talking almost rampant corruption inside the party. Is it simply a coincidence or a pointer to the evil that the Congress political party every bit good every bit the RBI is finding it likewise hot to handle?

I idea my poser on the TV demo had gone unnoticed. But I was pleasantly surprised when I found George Mathew of the Indian Express (Nov 3, 20101) bespeak the same interrogation to the RBI governor D Subbarao. He asked: Microfinance companies are charging really high involvement rates. Why is the RBI non doing anything to choose them down?

Subbarao replied:The RBI regulates alone i segment of the MFI sector, which is the non-banking finance companies involved inwards the microfinance sector. There’s no such classify categorisation of NBFC-MFIs. There are 37 NBFCs which are MFIs as well as regulated past times us as well as none of them are deposit taking. Only almost xiii out of 37 NBFCs are systematically of import amongst employment concern of over Rs 100 crore. The segment of the MFI sector that comes nether RBI rule is minor but inwards damage of total lending, it mightiness hold upwards significantly higher. Now at that topographic point are questions almost regulating involvement rates as well as our opinion is to motion away from regulating involvement rates. We can’t straight off plow towards this as well as laid out regulating involvement rates. In whatsoever case, this is a interrogation that Malegam commission volition instruct through as well as nosotros volition accept a sentiment after the study is available.” 

While this may hold upwards partly true, I intend the RBI (like the Congress party) is trying to plow a blind midpoint to the gory ongoings inwards the MFI sector. How tin dismiss the RBI governor laid out limited helplessness, as well as hence state that ‘in whatsoever case, this is a interrogation that Malegam commission volition instruct through as well as nosotros volition accept a sentiment after the study is available.” Does it hateful that Malegam commission volition give additional regulatory powers to RBI? The answer is No. The RBI is simply trying to avoid taking a harsh determination lest it reflects on the lending rates of the nationalised banks (which provides refinance to MFIs as well as others).

Only a few days back, the Sunday Indian Express (Oct 24, 2010) had inwards a full-page article entitled Andhra’s Small-Debt Trap (Read the total study at: http://www.expressindia.com/latest-news/Andhras-smalldebt-trap/701577/) written past times Sreenivas Janayala clearly brought out the malaise that afflicts the micro-finance sector. It quoted R Subramaniam, Principal Secretary, Rural Development, Andhra Pradesh, every bit saying: “But it is the fine impress inwards the clauses as well as loan understanding that actually practise the debt trap. When borrowers neglect to pay i EMI, the additional involvement is calculated at double or triple the involvement rate. The involvement continues to rest the same until the principal amount is paid off. More oft than not, the terminal involvement charge per unit of measurement plant to nearly fifty per cent.

Now delight enjoin me, isn’t this shameful? Does it brand the MFIs whatsoever dissimilar from the moneylenders that they describe every bit the villain of the story?

On October 16, the Andhra Pradesh government, for the laid out fourth dimension inwards the history of India, promulgated an ordinance, restraining the MFIs from using coercive tactics to recover loans as well as weekly interest, as well as maintain lending rates inwards check. This is alone i operate of the criminal action that MFIs indulge in. In my understanding, every bit numerous reports/studies lead hold shown, the main employment is the high involvement charge per unit of measurement that is existence charged from the minor borrowers. The AP authorities every bit good every bit the RBI is soundless on this. The conspiracy of quiet is taking a human toll.

The answer lies inwards what I had laid out suggested unopen to days agone on this blog. I had asked small borrowers (including the SHGs) to halt paying dorsum the loans. I am glad the one-time original government minister Chandrababu Naidu, who is on a iii twenty-four hours see to Ranga Reddy district, also asked “women who lead hold taken loans non to repay till involvement rates are reduced.”

In a democracy, people must heighten their voice. They must limited their anger inwards a peaceful vogue hence that the powers that hold upwards sit down dorsum as well as accept notice. MFIs accuse such exorbitant interests because the nation does non aid nor is it aware. The MFIs volition come upwards nether line per unit of measurement area alone of nosotros exert that pressure. As Rajan Alexander has inwards a alphabetic quality to wrote: “And how practise know they are vulnerable? Because Vijay Mahajan, the manly individual rear of MFIs inwards Bharat tells us so:

“We are facing collapse. Unless something changes on the ground, the manufacture every bit nosotros know it is basically gone.”

Mahajan, nosotros lead hold intelligence for you. The twenty-four hours when the likes of y’all are gone, that volition hold upwards the turning betoken for the struggle against poverty!”