In a significant move to regulate microfinance activities, the Assam Assembly has passed the Assam Micro Finance Institutions (Regulation of Money Lending) Bill, 2020. This legislation aims to protect borrowers from the state of Assam against coercive collection tactics and over-indebtedness, which have been issues of concern in the microfinance sector. By introducing this bill, the government seeks to ensure fair practices in the lending process and offer a safety net for borrowers during times of crises such as natural disasters.
Restrictions on Collection Agents and Practices
One of the critical aspects of the new bill is the imposition of restrictions on the use of collection agents by microfinance institutions (MFIs). The bill mandates that these agents must adhere to ethical collection practices and prohibits any form of coercion. This measure is designed to prevent harassment of borrowers, which has been a prevalent issue in the past, leading to stress and, in extreme cases, even suicides among debt-ridden individuals.
The bill also disallows door-to-door collections, a practice that often leads to public embarrassment and mental anguish for borrowers. By eliminating such intrusive collection methods, the bill aims to safeguard the dignity and privacy of individuals who avail microfinance services.
Limiting the Number of Lenders and Loan Amounts
To further combat the problem of over-indebtedness, the bill introduces a cap on the number of lenders from whom a single borrower can take loans. This provision is meant to prevent borrowers from becoming entangled in a web of multiple loans, which can be difficult to manage and repay.
Additionally, the bill places a limit on the total loan outstanding that a borrower can have at any given time. This ceiling on the loan amount is intended to ensure that borrowers do not accumulate debt beyond their means to repay. By doing so, the bill aims to promote responsible borrowing and lending behaviors, ultimately fostering financial stability within communities.
Repayment Moratorium During Natural Adverse Events
Recognizing the vulnerability of borrowers during natural calamities, the Assam Micro Finance Institutions (Regulation of Money Lending) Bill, 2020, includes a provision for a three-month repayment moratorium when such adverse events occur. This moratorium allows borrowers affected by natural disasters to defer their loan repayments without facing penalties or an increase in interest rates.
This compassionate aspect of the bill acknowledges that borrowers may face temporary financial hardship due to circumstances beyond their control. The moratorium is intended to provide relief during such critical times, allowing individuals and families to recover without the added burden of immediate debt repayment.
In conclusion, the enactment of the Assam Micro Finance Institutions (Regulation of Money Lending) Bill, 2020, represents a significant step towards creating a more equitable and humane microfinance environment in the state of Assam. By addressing key issues such as coercive collection practices, over-lending, and the challenges faced during natural disasters, the bill sets a precedent for other states to follow in safeguarding the interests of microfinance borrowers.
