Microfinance services cannot be cut off from society: Assam minister
File image of Assam minister Ashok Singhal

Guwahati: The Assam government is adopting a holistic approach to the issue of waiving microloans by considering interests of women borrowers as well as lenders, as the role of microfinance institutions cannot be ignored, a state minister said on Tuesday.

State Irrigation Minister Ashok Singhal, who heads a committee to review the financial implications of waiving microloans, said the MFIs have “flouted” rules by not following the RBI guidelines while lending money to rural borrowers, who form Self-Help Groups to avail such credit facilities.

Violation of lending norms cannot be allowed but at the same time functioning of the MFIs cannot be stopped in the state, otherwise, people will go to “kabuliwallahs” or “usurious private money lenders”, Singhal told PTI.

“Bad practices cannot be allowed to continue. The government have to intervene and the lenders will be held accountable for not adhering to the RBI rules, such as lending more than Rs 1.25 lakh to a single borrower.

“We are looking at all aspects and not anything in isolation. Microloans should be available to the people if they want to take it. A holistic approach is being adopted to resolve the issue,” the minister said.

He stated that the RBI has set guidelines for MFIs while lending money to rural women borrowers, but such norms were “flouted” by the lenders.

The minister asserted that “coercive action” such as sending musclemen to a borrower’s house or lifting household items or other personal belongings for defaults to repay loans cannot be tolerated.

On the government facing criticism for imposing riders on the loan waiver scheme, the minister said, “Why should there be speculation? People should not be misguided. Let the government come out with the final policy. The chief minister is committed to provide relief to the women.”

“Some conditions being given to borrowers who cannot avail the waiver programme, like wives of government employees or doctors or those having four-wheelers, are valid. This waiver scheme is not for rich people,” he added.

On the delay over the implementation of legislation passed by the previous government to rein in the MFIs, Singhal said it will be applied at the appropriate time.

The BJP-led state government, in its last term, had come out with “The Assam Micro Finance Institutions (Regulation of Money Lending) Act, 2020”, but it is yet to be implemented.

The law was enacted to prevent harassment of women borrowers as it has a provision of imprisonment and imposition of fine if lenders indulge in such unlawful activities.

It also has a provision to ensure that agents cannot visit residences of the borrowers for repayment.

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Singhal is leading a committee formed by the state government last month to deal with the issue of waiving loans availed by women SHGs from MFIs, as part of the BJP’s poll promises.

Chief Minister Himanta Biswa Sarma, who was the finance minister in the last government, had said in the state Assembly that agents of the lenders have indulged in harassment of women borrowers.

As per the findings of the committee, Singhal has revealed that a total of Rs 12,500 crore microfinance loans, comprising both principal and interest, taken by over 26 lakh customers, was outstanding as of March 31, 2021.

The loan amount was disbursed through 45 lakh bank accounts by 40 lenders.

Altogether, 19.10 lakh customers have borrowed from one MFI, 5.08 lakh from two lenders, 1.54 lakh from three and 60,000 from more than three credit providers.

The committee has suggested that the MFI loans will not be waived if it was taken after December 31, 2020, or the borrower’s family income is more than Rs 1 lakh per annum, or any member pays income tax and owns a car.

Another condition being set for availing of the waiver scheme is that those who use this facility will not get loans from any bank in the future as their Credit Information Bureau (India) Ltd (CIBIL) score will be adversely affected.

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