The Associated Chamber Of Commerce And Industry Of India (ASSOCHAM) on Wednesday called for raising the minimum capital requirement for micro-finance institutions (MFIs) to at least Rs. 25 lakh from the existing Rs. 5 lakh.
Addressing a press conference on the Micro Finance Institutions (Development and Regulation) Bill 2011, ASSOCHAM Secretary General D S Rawat said that the government must provide strong technology for adequate reporting, supervision and regulation, apart from raising minimum capital requirement for MFIs to at least Rs. 25 lakh.
He said that the Reserve Bank Of India should spell out some benchmarks for the healthy growth of MFIs so that the inflow of funds from banks can increase substantially.
"In fact, the RBI can delegate regulatory powers with respect to any class of MFI to an independent agency like NABARD which has the knowledge and understanding of their development needs," he said.
Rawat said the product model with a capped Annual Percentage Rate (APR) and the margin proposed do not support viability unless funds are made available to beneficiaries at an affordable cost.
"This will provide a singular approach towards defining financial inclusion also, which is on the government's agenda," he pointed out.
ASSOCHAM advisor Jyotirmoy Jain said that the products offered by MFIs need to be streamlined to suit all states and all sections of people. He said that the MFIs should lend loans to the poor and to the middle class at an affordable rate of interest considering their economical position.
Stating that the poor are not in a position to approach banks and financial institutions for their loans, he opined, "There is a need to put in place a recovery procedure to ward off unethical as well as coercive acts of MFIs which attract local action."
With various states practising different methods of loan recovery, he asked the RBI to set up special committees to frame a common law.
He also said that the double digit growth in the country would be possible with the revamping of micro-finance institutions in rural areas, and by amending a few sections in the Micro Finance Institutions (Development & Regulation) Bill 2011. He said India had a large MFI sector with a vast potential to grow at an annual average of 50%. (INN)