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In India, greed creeps into microlending, critics say by Rama Lakshmi

The microcredit revolution has been celebrated for helping poor women in developing countries start small businesses. By borrowing money for purchases such as a buffalo or sewing machine, the women were able to help lift their families out of poverty. But critics say the microcredit model has been perverted by commercial greed in India, with reports of abusive collection methods and sky-high interest rates. "What began as a simple, innovative model...

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Centre plans to restrict interest rate of MFIs

The Centre is planning to impose a ceiling of 18 per cent on the interest rate charged by MFIs on loans to SHGs. This was indicated by Union Finance Minister Pranab Mukherjee to Chief Minister K. Rosaiah during a telephonic conversation recently. Disclosing this at a media conference here on Monday, Minister for Rural Development V. Vasanth Kumar and Minister for Agriculture N. Raghuveera Reddy said Mr. Mukherjee informed that the...

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Staff of microfinance companies held on harassment charge

The Andhra Pradesh Police on Friday said it has arrested three people working with SKS Microfinance and Spandana on a complaint of harassment by a borrower, and might book the companies' respective promoters Vikram Akula and Padmaja Reddy under a new Ordinance to check coercive methods of loan recovery. The borrower, Ammulu, filed the complaint with the Yemmiganur police station in Kurnool district, about 270 km from Hyderabad, last night. A...

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Malegam to head RBI panel on microfinance by Dinesh Unnikrishnan

Financial sector expert Y.H. Malegam will head a Reserve Bank of India (RBI) panel to look into the functioning of microfinance institutions or MFIs and their regulations. The MFIs are in the business of giving tiny loans. Kumar Mangalam Birla, Shashi Rajagopalan and U.R. Rao – all on the boards of the Indian central bank – and RBI deputy governor K.C. Chakrabarty are the members of the panel. The committee, which will...

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Suicide leash on lenders

Public uproar over 20 suicides in two months has forced the Andhra Pradesh government to act to regulate micro-finance institutions. On October 14, the state government brought an ordinance making it compulsory for MFIs to register themselves, declare the effective rate of interest they charge, ensure that no security is sought for loans and no coercion is used for recovery. Non-compliance will be punished with a three-year prison term and a...

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