Sathyamoorthy
A
micro finance institution (MFI) is defined as an organization, other than a
bank, providing micro finance services. These services are defined as
micro credit facilities not exceeding Rs 5 lakh in aggregate, or with the
Reserve Bank’s (RBI) specification Rs 10 lakh, to each individual. Other
services like collection of thrift, pension or insurance services and
remittance of funds to individuals within India also come under micro finance
services.
a)
The Bill allows the central government to create a Micro Finance Development
Council with officers from different Ministries and Departments. This
council will advise the central government on policies and measures for the
development of MFIs.
b)
In addition, the Bill allows the central government to form State Micro Finance
Councils. These councils will be responsible for coordinating the activities of
District Micro Finance Committees and reviewing the MFIs in their state.
c)
District Micro Finance Committees review the development of micro finance
activities within the district, monitor over-indebtedness and monitor the
methods of recovery used by MFIs. These committees can be appointed by the RBI.
d)
The Bill requires that all MFIs to obtain a certificate of registration from
the RBI. The applicant needs to have a net owned fund of at least Rs 5 lakh. By
‘net owned fund’ the Bill means the aggregate of paid up equity capital and
free reserves on the balance sheet. The RBI should also be satisfied with
the general character or management of the institution.
e)
Every MFI will have to create a reserve fund and the RBI may specify a
percentage of net profit to add to this fund. There can be no appropriation
from this fund unless specified by the RBI.
f)
At the end of every financial year, MFIs are required to provide an annual
balance sheet and profit and loss account for audit to the RBI. They will
also have to provide a return detailing their activities within 90 days of the
Bill being passed.
g)
Any change in the corporate structure of a MFI, such as a shut down,
amalgamation, takeover or restructuring, can only take place with approval from
the RBI.
h)
The RBI has the power to issue directions to MFIs. This could include
directions on the extent of assets deployed in providing micro finance
services, ceilings on loans or raising capital.
i)
The RBI has the authority to set the maximum annual percentage rate charged by
MFIs and set a maximum limit on the margin MFIs can make. Margin is defined as
the difference between the lending rate and the cost of funds (in percentage
per annum).
j)
The RBI shall create the Micro Finance Development Fund. Sums raised by the RBI
from donors, institutions and the public along with the outstanding balance
from the existing Micro Finance Development and Equity Fund form this fund.
The central government, after due appropriation from Parliament, may grant
money to this fund. The fund can provide loans, grants and other micro
credit facilities to any MFI.
k)
The RBI is responsible for redressal of grievances for beneficiaries of micro
finance services.
l) The Bill allows the RBI to impose a monetary penalty of upto Rs 5 lakhs for any
contravention of the Bill’s provisions. No civil court will have
jurisdiction against any MFI over any penalty imposed by the RBI.
m)
The Bill gives the central government the authority to delegate certain RBI
powers to the National Bank of Agriculture and Rural Development or any other
central government agency.
n)
The central government has the power to exempt certain MFIs from the provisions
of the Bill.
Dream
Dare Win
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