Revised MFI Bill expected in Winter Session: SE Investments

In an interview to CNBC-TV18 Sunil Agarwal, MD, SE Investments said, the revised Micro Finance Bill is most likely to be tabled in the Winter Session of the Parliament. Last week, the Reserve Bank of India (RBI) expressed its inability to regulate all micro finance institutions including specifically that are not incorporated entities. Also, the central bank has questioned whether Parliament can even enact such a law (Read More).

According to Agarwal, now that the authorities involved- RBI, governor and other officers have expressed their opinion before the Parliamentary Committee, he is very sure the bill has reached to a concluding stage. He expects the Standing Committee chaired by former finance minister Yashwant Sinha to come up with a revised bill after considering these suggestions. Below is the edited transcript of Agarwal’s interview with CNBC-TV18 Q: On Friday we heard that the Reserve Bank of India (RBI) made a statement that it is not possible to supervise all the non company microfinance MFIs and they will look to supervise only the Non-bank financial companies (NBFCs). How do you see this panning out going ahead? What it means for the MFI sector? A: RBI has said this before the Standing Committee, in the context of MFI bill, which is pending before the Parliamentary Committee. RBI has very rightly pointed out that the Parliament has powers to enact a law for corporates, but as far as money lending is concerned, it is a state subject. Any bill which the parliament wishes to pass will have to be passed only after article 252 is activated. RBI has said that small entities, which are non corporate and are spread all over the country cannot be governed by RBI, which is a regulator. They don’t have that kind of reach; they are not present in every nook and corner of this country. So, RBI is suggesting is that the committee should find a solution and regulated entities, which are already been regulated by RBI will continue to be regulated by them and small entities doing very localised business and operating in a very small geographical area should be governed by states. The states already have money lending rules and regulations in place. Lot of entities can be covered under that. Also, very important point what RBI has pointed out is that any lending which has been collateralised should not be considered in the MFI definition, it should not be considered to be microfinance. Microfinance primarily should and must be restricted to loans, which are primarily given for income generation. Any loan which has been taken for consumption is not microfinance. Q: In your opinion considering that this has now come up as an issue, when do you expect the standing committee to come out with a revised MFI bill and it possibly seeing the light of day? A: MFI bill is pending before the standing committee of finance currently chaired by Yashwant Sinha, who has been the finance minister of this country in NDA regime. He is a very learned person and understands the rules, law and the processes very well. This bill was introduced in the Parliament in May 2012 and within May this was referred to the Parliament Committee on finance. I am very sure this has reached to a concluding stage. RBI has given its view before the parliament, governor has given the statement, officers have presented themselves, so now it is up to the parliamentary committee to take a note of all the suggestions, considerations which have come and probably present the act. We can hope that this comes in the winter session which is expected to be in December. The bill should see the light of the day which is the need of the hour for the MFI sector.