Hyderabad, Jan 21(Agencies) :The Andhra Pradesh government has expressed reservations on the Malegaon Committee's findings saying that its report failed to address core issues of the mico-finance sector but it falls short of expectations to put in place an effective protection mechanism for the borrowers.
In response to the RBI sub committee's report on micro finance, the state Government said that the Andhra Pradesh Micro Finance Institutions (Regulation of Money Lending) Act which was enacted last month will continue to be in place despite the committee' recommendation.
"The report has only addressed the concerns of the big MFIs(not even the MFI sector) and certainly not the concerns of the rural and urban poor borrowers who went through a traumatic period of coercion in the hands of MFIs in the recent past,"said a report by the state Panchayati Raj and Rural Development Department.
The state government report noted that the Malegaon committee had not recommended concrete steps for improving the credit flow from the banks directly to the poor using the SHG Mechanism which allows cheaper credit. "There should have been earmarking of priority sector lending for this purpose. The report tried to club the profiteering MFIs with the SHGs
which are owned and managed by poor themselves,"it said.
"No proper implementation machinery has been suggested.

Reliance is placed on the very same MFIs which have been violating the RBI guidelines at will and caused the current crisis to self regulate.

The committee failed to appreciate that State Governments are mandated to protect the people from money lending activities as per List II of the Indian Constitution.
The MFI activities being money lending activities cannot shield themselves from closer public
scrutiny," it added in the report which will be sent to the RBI.