The Ordinance facilitates SHG members to secure loans twice if they repay loans in a congenial manner.
Governor E S L Narasimhan, on Friday, approved the Ordinance on MFIs, promulgated by the State government to check the purported arm-twisting by the loan agencies' collection agents.
The Ordinance, inter alia, to an extent, safeguards the interests of the SHG members and facilitates the members to secure loans twice if they repay loans in a congenial manner.
Henceforth, the MFIs' machinery cannot visit the loanees' homes for recovery. In case of any violation, the MFIs are liable for punishment.
The State government will prepare the annual report on the administration of the Ordinance, which shall be placed before the State Legislature. The State government has also issued a GO in respect of the Ordinance, copies of which were circulated.
Addressing a crowded press conference, Minister For Rural Development Vatti Vasantha Kumar detailed the salient features of the ordinance, and said that in consultation with the High Court the government is also bringing out a Fast Track Court to directly punish MFI units in case of violations.
The Ordinance allows the borrowers, in case of any untoward incident, to complain against MFIs to the Project Director (PD), DRDA, who can initiate action.
MFIs must apply to the PD for registration within 30 days, specifying the villages or towns in which they operate, the rate of interest they charge and their system of recovery, and must also maintain registers of accounts and staff, and submit monthly statements to the registering authority - the project director concerned, without whose permission they cannot function.
The PD is empowered to check their records periodically. MFI working without being registered can be suspended.
In the absence of registration, the MFIs, including partners and directors, will be punishable for 3 years, and a fine of Rs. 1 lakh will be imposed.
Vasantha Kumar revealed that the interest should not exceed the principal, and that the MFI must bear the amount that exceeds the principal.
An amount equal to or twice the amount of principal shall stand discharged, and the borrower will be entitled to refund the excess amount from MFIs.
Asked about the higher rate of interest being charged, the Minister replied that it was for the RBI and Central government to decide it, and that the State could not interfere. He also said that the Ordinance draft has been formed with the advice of best of legal luminaries.
Courtesy: INN