Assam govt tables legislation to exclude entities regulated by RBI from ambit of Assam Micro finance institution Act
Assam government on Tuesday tabled a legislation which will exclude the entities regulated by RBI from the ambit of Assam Micro finance institution (regulation of money lending) act, 2020.
Assam has earlier made a law to regulate the MFI sector. The bill stated Assam Micro finance institution (regulation of money lending) act, 2020 has been made applicable to all the RBI regulated entities including NBFC-MFIs too.
To avoid duality of regulation the present amendment is proposed in some sections. This amendment will exclude the entities regulated by the RBI from the ambit of the Assam Micro finance institution (regulation of money lending) act, 2020.
Assam saw a spate of loan defaults and stress in rural households, raising the spectre of repayment crisis that hit Andhra Pradesh in 2010.
A section of microfinance borrowers and local groups were demanding a ban on microfinance.
According to the legislation passed by the state assembly in 2021 with an aim to protect and relieve the economically vulnerable groups and individuals from undue hardship of interest rates and coercive means of recovery by Micro finance institutions (MFI) or money lending agencies or organisations and for creating an effective mechanism to regulate the same government has brought this law.
The legislation stipulates that lenders shall ensure that a borrower who has existing loans from not more than two lenders and the current cumulative loan outstanding of a borrower shall not exceed Rs 1.25 lakhs. This limit also shall be taken into consideration in providing any existing loan with the same client from RBI regulated institutions.
For tea garden permanent labourers taking loan from MFI total indebtedness shall be capped at Rs 30,000 for borrowers
