The Andhra Pradesh assembly on Tuesday night passed a Bill seeking to protect women self-help groups from "exploitation" by micro finance institutions which have come under scrutiny for alleged strong-arm tactics in debt collection and steep interest rates.
The Micro Finance Institutions (Regulation of Money Lending) Bill, 2010, which will be placed in the state Legislative Council tomorrow, seeks to replace the Andhra Pradesh Micro Finance Institutions (Regulation of Money Lending) Ordinance promulgated by state government on October 15 in the aftermath of 75 suicides by micro finance borrowers in various districts in recent months.
The state government rejected the opposition demand that the Bill be referred to a joint select committee of the legislature to study the various provisions in detail and make it foolproof.
Also, the government rejected the demand for putting a cap on the rate of interest charged by MFIs saying the subject was under the purview of the Centre.
The Bill that was moved in the assembly on Saturday, was taken up for discussion on Wednesday after the principal opposition TDP's MLAs were suspended from the House and Left parties and the MIM legislators staged a walkout.
The TDP wrote a letter to Deputy Speaker Nadendla Manohar earlier in the day requesting that the Bill be referred to a select committee as it served no purpose without a cap on the rate of interest.
Praja Rajyam Party MLA Vanga Geeta, BJP floor leader G Kishan Reddy and Lok Satta legislator N Jayaprakash Narayan appealed to the government not to approve the Bill in haste and instead refer it to a joint select committee of the Legislature.
Earlier, Minister for Women Welfare V Sunita Laxma Reddy said 75 women have so far committed suicide in different districts of the state in recent months, unable to bear the "coercive" practices adopted by MFIs to recover loans.
"Not only are the MFIs charging usurious rates of interest on loans extended to women but also adopting strong arm tactics for recovery. The MFIs have been working only with the motive of making huge profits at the cost of the hapless poor," Sunita said.
It was to end such practices that the government promulgated the Ordinance to regulate MFIs' activities, she said.
Lok Satta Party leader Jayaprakash Narayan said the state government should place a cap on the rate of interest while enacting the law on MFIs.
"The state should treat MFIs as mere money-lenders and place a cap on the interest rate in due consultation with Reserve Bank of India," he said.
The growth of MFIs was only because of the collapse of co-operative credit system. "Wherever the co-operatives are strong, there is no MFI menace. MFIs have realised that there is profit to be made out of poverty and thus flourishing. It is also due to failure of the government," he added.
Narayan, however, cautioned that the "Kabuliwallah" system could re-surface if MFIs were forced to shut shop totally.
The Bill passed in the assembly contains no changes despite a demand raised by micro finance institutions' Network for certain amendments.
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