We plan to bring MFIs under State Act, says Maha minister

The MFIs' mode of recovery of loans from self-help groups often take the form of harassment, the minister said.

He mentioned that around 18 MFIs are involved in this issue.Below is the verbatim transcript of Deepak Kesarkar's interview to Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Latha: Why did you set up this SIT or special investigation team? What kind of complaints did you get?A: There were several complaints in Amravati district of Vidarbha region then again in Nagpur. When this was being discussed in the assembly, there were several complaints from Sangli district as well. However, the complaints which were registered in Amravati district -- we have sent one report by the Commission of Amravati to the RBI regarding these companies. First of all, they are supposed finance maximum two self-help groups but it has come to our notice that four-five companies have financed one self-help group. So it is like -- for recovering another loan is being procured.It is more like you can get from people who are giving private loans. These companies are registered with RBI and they are being properly regulated by RBI. So RBI is empowered to fine them, even that imprisonment is also there in the RBI act. However, no other authority has jurisdiction into that. So this is something unusual. So we are thinking of modifying our act also like Andhra Pradesh and bring these companies under state act. So all we are looking at is cooperation from RBI which is always there to the government and if something is going wrong while financing self-help groups which belong to the poorest of the poor woman then it is extremely wrong and government will have to take very serious steps about this. So in addition to our regular investigation, we are appointing a committee, which will go into detail because we could know about the complaints only when it comes to the police department but there could be several self-help groups whom nobody has approached when they are suffering a lot. So I think that would be a proper step to investigate more into this matter and give justice to the self-help groups.Latha: This is a bit puzzling, it is RBI which by law regulates these microfinance insurance (MFI) companies, not the state government. So what exactly are your plans then?A: They are to be regulated by RBI as per the present act and if you look at the government machinery what we are doing for the local self-help groups wherever the districts, which are intensified districts where self-help group needs more help, there we are giving it at 6 percent whereas this microfinance companies are allowed to charge up to 26 percent. This is something very unusual and there also some control is essential and the way they are recovering the money -- nothing is mortgaged -- in spite of that they are harassing the people, that is what the ladies of self-help groups are telling.Sonia: We spoke to many microfinance companies, we just spoke to a company called Bharat Financial Inclusion and they said they are not guilty of any kind of harassment, can you name any of the companies that could be guilty?A: What has come to our notice is that around 18 companies are involved into this. Primarily, I can tell you. I cannot tell you the names right now because I am on a tour and I am being interviewed outside Mumbai. Had I been in Mumbai, I could have given you more details but the details or the names are not important. It is more important that the people are being harassed, the rate of interest is very much objectionable and the people who are supposed to get facilities from the government or the credit institution at a lower rate of interest, they are being charged more interest and they are being harassed for recovery of the loans.Sonia: Can you tell us by when will the investigation team give its report?A: I had given the reply in the house three-four days back. So after reaching Mumbai, we will have a meeting. We will decide who are going to be the members of the committee and then we will have to decide in what different fields this committee is going to investigate. One could be the number of self-help groups who have procured loans from these microfinance companies. How many microfinance companies are involved into it? Third is that we should amend the act to see that these companies have some more regulations or some control at the state level also. So all this would be looked into by the committee and when the committee reports come, we will take appropriate action.Latha: Have you written to the RBI saying that you want a curb on the interest rate, have a cap on the interest rates, have you written to RBI at all, have you got any reply?A: We have not approached them after this assembly question. So after reaching back, I will have to talk to several authorities and then we will have to form the committee.