'India plans microlenders' regulatory bill'

NEW DELHI: The Indian government proposes to introduce a bill to regulate microfinance institutions, a junior finance minister said on Tuesday.

"The Department of Financial Services proposes to introduce the Micro Finance (Development & Regulation) Bill, 2010, after taking into account the views of RBI ( Reserve Bank of India) and the Malegam Committee recommendations," Namo Narain Meena said in a written reply in the upper house of parliament.

The Malegam committee is expected to submit its recommendations in three months.

The fast-growing, largely unregulated small loans sector has come under scrutiny after fears of large-scale defaults due to high interest rates and reports of suicides due to mounting debt.

Loans can be as low as 2,000 rupees ($44) at interest rates that can top 30 percent. Borrowers use the cash for various ventures such as buying livestock or opening a tea stall.

The eastern state of Orissa said last Friday it would look into lending to the poor, joining southern state Andhra Pradesh which last month tightened rules.