For creating an effective mechanism to regulate Microfinance institutions(MFI), the Assam government has tabled legislation in the state assembly.
The bill 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.
Assam finance minister Himanta Biswa Sarma tabled legislation in the state assembly Assam Microfinance institutions (regulation of money lending) bill, 2020.
For tea garden, permanent labourers taking a loan from MFI total indebtedness shall be capped at Rs 30,000 for borrowers who have single source of income and total indebtedness shall be capped at Rs 50,000 for borrowers who have multiple sources of income.
According to the bill, all MFIs operating in Assam will within 30 days from the date of commencement of this Act shall apply for registration. No loans or recovery of any loans will be made without registration under this Act.
The Registering Authority shall conduct verification of details furnished by the MFI and provide registration for two years. MFIs will have to apply for renewal of registration and application for the same has to be filed in 60 days before expiry of the period of two years.
The bill stated, “ All micro-credit activities shall be reduced during floods, other periods of distress or natural calamities and shall be given a minimum period of three months of a moratorium on interest payment and may be extended by multiples of the same”.
The bill said, “Not more than two MFIs shall lend to the same borrowers. No MFs shall seek any security from a borrower by way of pawn, pledge or other security for the loan”.