The Orissa government has proposed that the Microfinance Institutions (Development and Regulation) Bill for prohibiting microfinance institutions (MFIs) from taking public deposits.
This move follows the several chit fund scams unearthed in the state that is now threatening to engulf several MLAs and MPs of the Biju Janata Dal, the ruling party in the state.
The Bill, introduced in the Lok Sabha in May 2012 and was later referred to the Parliamentary Standing Committee on Finance headed by senior BJP leader and former finance minister Yashwant Sinha, who in his report advised wider consultation and tabling a fresh legislation before Parliament. In its comments sent to the finance ministry early this month, Orissa has made it clear that the new Bill may mention prohibition of deposit clearly under an appropriate clause. The Bill in its current form has provision of micro-credit, collection of thrift pension, insurance and remittance of funds.
Orissa has reasoned that only banks may accept public deposit. “As we are going to open bank accounts for all citizens, MFIs need not venture into deposit taking activity,” said the state finance department to the Union finance ministry in note, accessed by The Indian Express. It has also opposed the provision of winding up and closure of business of an MFI only to the activity of providing micro-finance business. The state government has reasoned that is not always practically possible to segregate the microfinance activity from other activities of an MFI.
“Microfinance business can easily be shown as other business by dubious book entries. Hence in case of winding up proceedings, the entire business of the defaulting MFI may be wound up,” the finance department note said.
Of the 44 chit fund companies in Orissa now being probed by CBI, at least two were involved in microfinancing. To make the Bill more stringent, Orissa wants that all offences done by the MFIs should be cognisable and non-bailable.
As there is no provision of compounding of offences in the current Bill, Orissa wants certain offences other than deliberate frauds be compounded on a case-to-case basis by a competent authority.
SOURCE: Indian Express
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