Finance Minister Arun Jaitley also said the government is planning to off-load some shares of nationalised banks to small investors and use the funds for further expansion of banking network in the country.
"We have started the consultation process with everyone, including state governments, to prepare a new bill," he said in Lok Sabha during Question Hour.

The Finance Minister said the Micro Finance Institutions Development and Regulation Bill, 2012 was introduced in Lok Sabha on May 22, 2012 and was referred to the Standing Committee, which submitted its final report on February 17, 2014.

The Committee urged the government to have wider consultations with state governments and stake-holders and bring forth a fresh legislation before Parliament. The Bill lapsed due to dissolution of Lok Sabha and shall have to be introduced fresh, he said.

Replying to a supplementary question, Jaitley said interest rate of the MFIs are decided by market factors but there are clear guidelines of the Reserve Bank of India for strict action against violators.

The Finance Minister said a large number of MFIs are self help groups -- around 46 per cent - and many of them are being run by women.

"There is nothing wrong if we encourage such MFIs as they help small borrowers every day. However, if any MFI is involved in unfair practices, the RBI guidelines are clear on that -- there should be transparency in disbursement and recovery, he said.

Jaitley said some of the MFIs are doing reasonably well and growing and expanding their networks fast.

"Now the question is whether we will allow such self help groups to grow or regulate them and put some difficulty in their operations. On the other hand, there is case (of unfair practices) of a company in Andhra Pradesh," he said.

The Minister said RBI has reported that it has not come across any instance of an institution registered as an NBFC-MFI charging rate of interest beyond the one prescribed by the Reserve Bank of India.

The RBI has issued regulatory guidelines on July 1, 2014 containing regulatory framework for NBFC-MFIs. Further, to safeguard the interest of borrowers from NBFC-MFIs, RBI has issued detailed guidelines on Fair Practices Code in 2008 and revised the same from time to time and the last such revision was on February 18, 2013, he said.
Jaitley said the government has created 'India Microfinance Equity Fund (IMEF) of Rs 100 crore with SIDBI with the primary emphasis of providing equity and quasi equity to smaller MFIs to help them maintain growth and achieve scale and efficiency in their operations.

"A further allocation of Rs 200 crore has been made to the IMEF in budget. Up to March 31, 2014, an amount of Rs 126.75 crore has already been committed," he said.
The Finance Minister said the main objective of the government is to ensure reach of banking services to 100 percent of the population from the present 58 per cent.

"We will retain the PSU character of the nationalized banks but planning to off load some amount of shares to small investors so that the money acquired from it could be used for expanding the banking network.

"Our main objective is to ensure that at least two persons in every house hold have bank accounts," he said.

Replying to another supplementary question, Jaitley said the government will try to simplify the process of opening bank accounts and see how loan could be given to people above 65 years of age.

He said the banks have the problem of large Non Performing Assets which needed to be looked into besides maintaining civility in recovering the loans.

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