Dec. 23: The HDFC chairman, Mr Deepak Parekh, has criticised Andhra Pradesh government for “hastily” passing a legislation regulating micro lenders, saying that many independent directors of MFIs have quit in its aftermath.
The passing of the Andhra Pradesh Microfinance Institutions (Regulation of Mon-eylending) Act on December 15 has led to “consternation” among independent directors and many of them have resigned fearing arrest, Mr Parekh said in a public lecture on governance at the Indian Merchants’ Chamber here.
“The hastily recently-passed AP Act of micro finance has led to consternation among independent directors of certain microfinance agencies and many of them have resigned during the last week under fear of being arrested,” he said.
The AP government moved in with a law to regulate MFIs following allegations of suicide by some borrowers in the coastal state due to pressure from collection agents of MFIs. The legislation has led to wide scepticism among banks, which lend to microfinance institutions and a majority of them have stopped fresh loans to MFIs since an ordinance for the act was made public two months ago.