MFIs may have to recalibrate business in Assam following state curbs

The state government has imposed restrictions on lending and recovery practices in response to the 2019 flood crisis

The microfinance (MFI) industry begins CY21 on the backfoot, given the recent passage of the Assam Micro Finance Institutions (Regulation of Money Lending) Bill, 2020.

This Bill was tabled in response to the crisis that engulfed the state after the 2019 floods, which lay bare the loan recovery practices of the MFI industry and exposed the problem of over-indebtedness.

While the changes are radical, “the larger concern is whether Assam will set a precedent for other states”, says the CEO of a small finance bank, adding that the state proceeded with the Bill despite the RBI’s objection.

The new legislation, when made an