AP govt set to bring new MFI products under MFI Act

Hyderabad, Feb 21 (PTI) Sensing foul-play in new productslike loan for men and interest-free loans by microfinanceinstitutions (MFI), the Andhra Pradesh government is all setto issue a notification to bring these products under thepurview of the new MFI Act.

Microfinance institutions in the state, whose goingbecame tough after the introduction of MFI Act, are nowfinding new methods to carry on business by introducing freshproducts like loans to males and interest-free loans, a seniorstate government official said.

According to R Subrahmanyam, principal secretary(panchayat raj and rural development), some of the MFIs areoffering loans to the husbands of women members of SHGs sayingthat extending loans to them will not attract the MicrofinanceAct that came into being in December.

Some MFIs are mulling an option to extend interest-freeloans arguing that they also will not come under the purviewof the Act, he said.

"That shows the desperation. When you want to make hyperprofit, then try to duck and try to find ways. We will not letit happen. A notification is being issued in day or two makingit clear that these kind of loans will also come underMicrofinance Act," Subrahmanyam told PTI.

The Andhra Pradesh Microfinance Institutions (Regulationof Moneylending) Act, 2010 is aimed at regulating the sectorin general by keeping tabs on the lending and recoveries ofthe MFIs in the state.

It prohibits MFIs from lending to the self help groups(SHGs) that are already covered by the formal banking systemwithout seeking prior approval of the banks. (More) PTI GDKVKV

Share Microfin Limited, one of the largest MIFs in the country, recently launched a product by name ''Suraksha Loan''which is exclusively for male members.

Share Microfin, in its circular to its branches clearly,said that the loan has to be extended to a woman member of anSHG Group.

The circular stated that the loan outstanding will benullified only in case of death, but not in case of suicide.

When contacted sources in SKS Microfinance said extendinginterest-free loans was just a vague idea and one of the 40-odd concepts the company is giving a thought.

"Even if they term those loans as interest-free loans orloans to males, all sections of the Microfinance Act willattract. It will be viewed as the loaning is done withoutfollowing the Act. They will have the risk of gettingregistration cancelled and also liable for prosecution,"Subrahmanyam said.