, March, 21 2007 - The Microfinance Institutions (MFI) Bill, seeking to make the National Bank for Agriculture and Rural Development (NABARD) as the sector regulator, is likely to be introduced in the ongoing budget session.

A senior government official said “The bill has been sent to Lok Sabha yesterday and is likely to be tabled in a day or two”.

It is believed that the bill is likely to be referred to the standing committee for further deliberations by all stake holders.

The bill is aimed at putting in place stricter regulations for institutions engaged in deposit and lending of funds, and minimum regulations for others engaged in offering only lending services at the micro level.

It envisages that there should be no cap on interest rate for micro-financing though there is pressure from certain sections, saying that without any cap, the foreign financial institutions entering this sector would have a free hand to exploit the poor people.

However, the bill has a provision to safeguard the interest of people depositing their money in SHGs.

Besides, MFIs could be penalised for violating these norms.

The bill will help create a friendly policy environment for micro-finance services, the IFMR Trust, chief operating officer, Puneet Gupta said.

The industry has set the target of credit disbursal of 10 billion dollars by 2010 against the existing exposure of 1.5 billion, he said, adding the bill would help in achieving the target.