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    • A Seminar on “NABARD (Amendment) Bill-2006” (MFI-Regulatory Bill) on 9th February, 2007.


Seminar on NABARD (Amendment) Bill 2006 targeting Micro Finance regulation.
At a recent Seminar held under the auspices of the Indian Institute of Economics, Hyderabad, chaired by Former Judge Sri T.N. C. Rangarajan, the participants came heavily on the structure and content of the NABARD Amendment Bill aiming to regulate Micro Finance Organizations.  The preamble of the NABARD Act 1981 and that of the proposed Amendment do not synchronize with each other.  The Amendment drafted would seem to be a cut and paste document – some drawn from the IT Act, some other contents from other Acts dealing with the Banks and Companies.  The intentions of the Bill have also come for questioning in that whether the Bill is meant to enlarge the Financial Inclusion effort to help the poor or to regulate the organizations that are meant to serve the poor.  One of the participants said that the Bill in the form in which it was being discussed would appear to have changed.  Another mentioned that it has been actually prepared for the NABARD by the Association of Micro Finance Institutions, viz., SA-DHAN.  The subject of the Bill, if it can be called so, Micro Finance sector, would require clear definition and the definitions applied to Micro Finance Institutions and Micro Finance Organizations, and cooperative institutions dealing with micro credit and savings are so complex as would lead to judicial interpretation of sorts when applied.  NABARD, the lender hitherto, would have conflicting role if it were to take on the regulator’s role as embedded in the Bill.  Micro Finance, as a subject, would not fall either in the State or Central or concurrent list.  It is the domain of Finance and falls within the regulatory domain of the Reserve Bank of India. 

1. Cooperatives accept the savings of their members. Societies, Trusts, NBFCs, if permitted to do so,  would be  accepting the savings of a scattered public. Where the scattered public are the poor, it is not in their interest to have their savings managed by such closely held organisations. At best, such organisations may be permitted to accept collateral from their clients, against loans issued. In the case of cooperatives, as they accept savings from their members, they should not be treated on par with those that accept public deposits. Cooperatives are fighting a hard battle to be freed of unnecessary government controls - to have the government replaced by Nabard will be to ensure that financial businesses belonging to the poor are subject to an inspection raj.
2. Cooperatives are already governed by cooperative laws, and by other laws of the land applicable to all citizens/their organisations (such as tax laws, crime related laws, etc). There should be no need for any new control over them.

Experts who gathered were of the unanimous view that the time is not ripe for the formulation of a Law exclusively for the Micro Finance Institutions as most of these institutions are still evolving.  Any misdemeanors or acts of indiscretion on the part of the existing institutions or organizations can easily be dealt with, within the scope of existing Laws.   Countries like Bolivia, Indonesia, Philippines, Bangladesh and Pakistan have put in place Micro Finance Act only after 2003.  These countries have adopted two-tiered approach and our Act could be modeled on such Laws.

The opinions expressed by the participants lean towards the thought that it will be in the interest of millions of poor and vulnerable groups. It is better to wait for an appropriate time till the concept and philosophy of micro finance settles down at the gross root level of operation.

Shri O. SwaminathaReddy, Former Chairman, Andhra Bank and Chairman Indian Institute of Economics felicitated Shri M. Ramakrishnaiah, the Founder Chairman of NABARD on the occasion. Prof. Md. Akhtar, Legal Expert, Vijay Mahajan of BASIX, M. Ramareddy of CDF, Shashi Rajagopalan, an Activist in Cooperative Advocacy and SHG movement, V.K. Srinivasan, I.A.S.(Retd), P.V.A. Ramarao, former MD of NABARD actively contributed to the discussions. Dr. B. Yerram Raju summed up the proceedings and thanked the stakeholders for their active participation.



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