Microfinance companies to be under Dispur's radar soon

GUWAHATI: The State government is now bringing the microfinance institutions operating in the State under its regulations through an ordinance to put an end to their alleged pressure tactics in loan recovery. The State Cabinet has passed the draft ordinance to this effect.

There have been protests in various areas across the State against alleged harassment by such financial institutions in the name of loan recovery. The proposed ordinance will treat harassment in loan recovery as a punishable act.

Limiting (capping) loan amounts, prohibiting forceful collection of loan installments and insulting borrowers for delay in making payment, prevention of property mortgage for such loans among others have been incorporated in the draft ordinance.

Taking a holistic view of the issues relating to lending of money by the microfinance institutions, the State Government is now bringing the 'Assam Microfinance Institute (Regulation of Money Lending) Ordinance-2020'.

According to the draft ordinance, all microfinance institutions operating in the State will have to apply for registration before the would-be authority of the state within 30 days from the commencement of the ordinance. Without registration, no microfinance company can offer loans and recover loans in the State. The registration authority will have the leverage to cancel registration of such financial institutions through suo moto cases or by taking suo moto cognizance of complaints to be lodged by victims. These lenders will have to also ensure that no person is allowed to take loan if he/she already has two other loans.

In the case of permanent labourers in tea gardens, this draft ordinance says that while the maximum loan of Rs 30,000 can be given to a person with single source of income; those with multiple income sources can be granted the maximum loan amount of Rs 50,000.

Other provisions incorporated in the draft ordinance include non-imposition of late fine for delay in payment of installments. Moreover, the microfinance institutions will not be allowed to employ any agent for loan recovery; and the loan interest should not exceed the rate fixed by the RBI (Reserve Bank of India).

All documents of loans should be in vernacular languages so as to let all sections of borrowers know them well. The microfinance companies should publish a 'Fair Practice Code' in accordance with RBI guidelines, added the draft ordinance.