The draft Microfinance Bill placed by the Ministry of Finance on its website on 6 July 2011 represents a major step forward in the government’s engagement with the microfinance sector. In the first main paragraph of its circular of 3 May 2011 the Reserve Bank of India made a clear statement of the decision to regulate the microfinance sector as a separate category.
However the circular itself focused on the priority sector status of bank loans to MFIs and did not indicate how the decision on separate regulation was to be implemented in practice. A reading of the draft Microfinance Bill clears this uncertainty to a large extent and creates the expectation that a promotional framework for microfinance as a tool of financial inclusion can now be put in place. However, the bill does raise questions about whether
1. The power to set rules for the conduct of business between the MFIs and their clients would result in the regulator micro‐managing a business relationship, and
2. The power to delegate any aspect of development or regulation means that the main supervisory function would be delegated.
But first a brief presentation of some the key provisions of the bill of greatest interest to those engaged in the practice and provision of microfinance services
Download M-Cril’s comments on the draft Microfinance Bill
at the link below