Government has started consultations with all stake-holders, including state governments, for enacting a law to regulate Micro Finance Institutions (MFIs) for ensuring interests of customers.
Finance Minister Arun Jaitley also said the government is planning to off-load some shares of nationalised banks to small investors and use the funds for further expansion of banking network in the country.
“We have started the consultation process with everyone, including state governments, to prepare a new bill,” he said in Lok Sabha during Question Hour.
The Finance Minister said the Micro Finance Institutions Development and Regulation Bill, 2012 was introduced in Lok Sabha on May 22, 2012 and was referred to the Standing Committee, which submitted its final report on February 17, 2014.
The Committee urged the government to have wider consultations with state governments and stake-holders and bring forth a fresh legislation before Parliament. The Bill lapsed due to dissolution of Lok Sabha and shall have to be introduced fresh, he said.
Replying to a supplementary question, Jaitley said interest rate of the MFIs are decided by market factors but there are clear guidelines of the Reserve Bank of India for strict action against violators.
The Finance Minister said a large number of MFIs are self help groups — around 46 per cent – and many of them are being run by women.
“There is nothing wrong if we encourage such MFIs as they help small borrowers every day. However, if any MFI is involved in unfair practices, the RBI guidelines are clear on that — there should be transparency in disbursement and recovery, he said.