The finance ministry on Tuesday said it was actively considering establishing a regulatory framework to deal with the concerns of microfinance institutions (MFIs), accused of charging exorbitantly high interest rates and using unethical loan recovery practices.
Shashikant Sharma, Secretary, Financial Services, said microfinance was an important plank in the government’s agenda for financial inclusion, but the sudden and rapid growth of MFIs had given rise to lending malpractices by some of them.
A strong and effective regulation of the sector was, therefore, imperative to put an end to undesirable practices and put the sector on the path of providing inclusive growth, Sharma said.
Last year Andhra Pradesh introduced a law to regulate MFIs, which were under fire on complaints of charging high interest rates from borrowers and using coercive practices for loan recovery.
