RBI may lower interest charged by MFIs

The Reserve Bank is contemplating a revision of the maximum interest rates chargeable by the Micro Finance Institutions. This will be part of the measures being taken to ensure that the MFIs do not employ strong-arm tactics to recover loans from hapless loanees which had in turn led to some of them taking the extreme step of committing suicides.

The revision of the rules, Acts or the interest rate under reference comes close on the heels of the state government’s promulgation of an Ordinance to check the spread of tentacles of the MFIs.

Minister for Rural Development Vatti Vasantha Kumar on Saturday told media persons that RBI Governor D Subbarao had talked to Chief Minister K Rosaiah over the issue on phone. Mr Subbarao informed the Chief Minister that the RBI Board of Directors had discussed the interest cap issue raised by the state government.

Mr Vasantha Kumar revealed that Mr Rosaiah had written letters to the Union Finance Minister Pranab Mukherjee and RBI Governor D Subbarao on the heavy rate of interest being charged and the forcible loan collection including the unethical practices adopted by the MFIs and how the poor are in distress and suffering due to this.

Mr Mukherjee reacted immediately and is understood to have told Mr Rosaiah that the Centre was well aware of the issue and is contemplating measures to check the issue.

Mr Subba Rao also responded on the subject and spoke to the Chief Minister on phone and informed him that the RBI officials had discussed the issue in a Board Meeting. Mr Subba Rao also revealed that the Bank had appointed a Subcommittee to evolve modalities to arrive at a decision in favour of lowering the interest rate.

The RBI governor is also understood to have informed the Chief Minister that the Apex Bank would also take the suggestions of the state into account while revising the rule or act or the interest rate under reference.

It may be recalled here that the state government had already passed a draft resolution for Money Lender's Act and the same was forwarded to the Centre for Parliamentary approval and then the assent of President of India.

Mr Vasantha Kumar informed that because the state government had no say on regulating the interest charged by the MFIs, the Chief Minister had requested in his letter to the Union Finance Minister detailing how the poor women became targets and were resorting to suicides and how important it was to regulate the interest component.

The minister also stated, as a matter of fact, that the union finance secretary c. Gopalan had bluntly said that the state had no say on this issue.