December 16th, 2010
Kolkata (The Wall Street Journal): The Reserve Bank of India will soon consult bankers to ensure lending by microfinance institutions isn't disrupted, after authorities in the southern state of Andhra Pradesh initiated steps to tighten control over alleged sharp lending activities. Follow up:
Microfinance institutions borrow from banks and usually lend less than $200 to the poor, who then use the money to start or expand small businesses.
The sector has been subject to new regulations amid political criticism in Andhra Pradesh, which accounts for as much as 30% of the Indian industry, on allegations some micro lending firms used coercive recovery practices and pushing of borrowers into a debt trap.
The total outstanding loans to the microfinance institutions in India is about 300 billion rupees ($6.32 billion), with an average maturity of two years. Read more.....
Hat tip to Sanjeev Kulkarni.