India: Cabinet to Soon Approve Microfinance Bill
India, June, 29 2009 -
The Union Cabinet is likely to soon approve the Micro Financial Sector (Development and Regulation) Bill, 2009 which seeks to make NABARD the sector regulator.
The finance ministry has prepared the cabinet note for the new Bill as the old bill lapsed with the expiry of the 14th Lok Sabha, official sources said.
The objective of the Bill is to ensure development and orderly growth of the micro-finance sector in rural and urban areas.
It aims to provide an enabling environment for ensuring universal access to integrated financial services, especially to women and certain disadvantaged sections.
The government had tabled the Micro Financial Sector Bill in March 2007 in the Lok Sabha. The Bill was subsequently referred to the standing committee on finance.
The content of the new Bill remains more or the less same, sources said.
Once it is cleared by the Cabinet, the ministry would push it in the budget session itself, they added.
The new Bill entrust the function of development and regulation of the micro financial sector to the National Bank for Agriculture and Rural Development (NABARD), a subsidiary of the Reserve Bank of India.
The passage of the Bill would result in the regulation of the micro-finance organisations not being regulated by any law for the time being.
It has provision for registration of micro finance organisations collecting thrift from individual members of self help groups or through a group mechanism.
The Bill also provides for creating of a reserve fund and maintenance of accounts and periodical returns to be submitted by micro financial organisations.
At the same time, it has a provision for penalties for non-compliance with the regulatory requirements of the Bill.
The Bill empowers NABARD to frame a scheme for appointment of one or more Micro Finance Ombudsman for settlement of disputes between eligible clients and micro finance organisations.
It also provides for constitution of a micro finance development and equity fund for the development of the micro finance sector.