Andhra Pradesh chief minister N Kiran Kumar Reddy has asked the bankers to enhance the credit flow to self-help groups (SHGs) to avert the adverse affects of lending by micro finance institutions.
Addressing the state-level bankers committee (SLBC) meeting on Wednesday, the chief minister told them that the government wants the Rs 7,500-crore loans given by microfinance institutions (MFIs) to people organised under SHGs be transferred to the books of the banks by means of swapping to the extent possible. It needs to be done to save the poor from high interest rates being charged by MFIs, he said.
“I want bankers to go beyond the targets to achieve this objective,” he said at the meeting. An amount of over Rs 9,000 crore have been targeted under SHG-bank linkage programme for the year 2011-12 as compared to the actual credit flow of Rs 6,791 crore so far this year. The officials expect the credit flow to be at Rs 11,000 crore considering the additional demand coming on account of stoppage of fresh loan disbursement by MFIs under stricter control of the state government.
Few fresh MFI loans
The intent of the government is clear from the following fact: Only about 1,646 of the 60,833 applications forwarded by MFIs for fresh loans amounting to Rs 71 crore have been accepted by the district authorities while rejecting the rest of the proposals. Under the present rules, the MFIs can not give a single loan with out the permission of the district rural development authorities(DRDAs). The government has also barred MFIs from giving multiple loans to a single person.
In a further setback to MFI activities, the state government had chalked out a detailed plan of action for providing bulk loans to the Mandal Mahila Samakhyas (MMS), the federations of SHGs under the SHG-Bank linkage programme. Under this scheme the banks would extend bulk loans with a size of Rs 50 lakh and more to each of these MMS, which will be considered as community financial institutions.
The MMS will give loans to SHG members at a rate of interest not exceeding 18 per cent, according to the plan submitted to the SLBC by the government. Union Bank of India has already sanctioned Rs 50 lakh each to 20 MMS and 80 more proposals are under consideration, according to the officials of rural development department.
“The need for bulk finance to MMS is felt more than ever in the present context of MFI crisis. Currently, there is no way a SHG gets another loan during the currency of existing loans, and loan is not available to them for a period of 3-5 years driving poor to access high cost loans from MFIs/ money lenders,” a report said.
