RBI to act on errant MFIs

Dec 08, 2010 |

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Dec. 8: The Reserve Bank of India (RBI) on Wednesday said that it will take “countrywide” action against errant micro-finance institutions (MFIs) once its sub-committee submits a report on the issue in January.

“We have appointed a committee headed by Mr Y.H. Malegam to look into the activities of MFIs. After the report is submitted, action will be taken countrywide,” the RBI governor, Dr D. Subbarao, told reporters after meeting West Bengal Chief Minister, Mr Buddhadeb Bhattacharya, here.

MFIs have come under heightened scrutiny by the authorities over allegations of unfair lending practices, he said. While some MFIs have been accused of indulging in irregular practices like multiple lending, others allegedly sanctioned loans for non-priority purposes, he said, adding that the coercive loan recovery practices of some microfinance institutions were also under the scanner. “Let the Malegam report come. We will then take action,” Dr Subbarao said. The Centre also plans to table a Bill on MFIs once the Malegam report comes out.

The West Bengal finance minister, Mr Asim Dasgupta, also said there was a need for regulation of MFIs operating in West Bengal. “We will also study all the 21 MFIs operating out of the state,” Mr Dasgupta said.

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