Government to introduce Micro-Finance Bill in winter session

03 Nov 2011 Evaluate

The government is likely to introduce Micro Finance bill which will mandate all micro-finance institutions (MFI) to register with the Reserve Bank of India (RBI) and entrusts the task of regulating the sector to the central bank in the winter session of parliament. The draft bill also proposes MFIs to have minimum net-owned funds of Rs 5 lakh.

The ministry of finance is in discussion with the all concerned stakeholders for modification of the draft Micro Financial Sector (Development and Regulation) Bill, 2011. The Finance Minister is hopeful to submit the same in upcoming winter session which starts from November 22.

Earlier in March 2007, the government had introduced the Micro Finance sector Bill in Parliament however it lapsed when the term of the 14th Lok Sabha expired in 2009. In July 2011, the government circulated draft Micro Finance Bill for the public comments.

Additionally, it also recommends creating a Micro Finance Development Council to advice government while making policies, schemes and other measures required in the interest of orderly growth and development of the sector and micro-finance institutions with a view to promote financial inclusion.

The recommended council will include members not below the rank of Executive Director from NABARD, National Housing Bank, RBI and SIDBI. Besides, joint secretaries from the Ministry of Finance and the Ministry of Rural Development will also be part of the council.

The draft bill also recommends that any MFIs which are not a registered company under the Companies Act, 1956 and becomes systemically important MFIs shall convert its institution into a company under the Companies Act, 1956, with or without a license, in Section 25 of the Act.

This should happen within six months from the date of the balance sheet that shows the MFI has become a systematically important micro-finance institution in terms of the rules prescribed by the central government, the draft bill cited.

According to the draft Bill, the apex bank may pass an order guiding MFIs to cease and desist from execution of micro finance activities if it is found acting in manner prejudicial to the interest of its clients or depositors. The RBI will cancel the certificate of registration granted to MFIs if it fails to meet with the directives or condition.

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