Micro lenders fret over Tamil Nadu Bill to prevent coercive recovery

Microfin players say proposed checks and balances may hinder lending operations

- ANUPREKSHA JAIN

The microfinance industry, already facing multiple headwinds, is now bracing for another disruption with the Tamil Nadu government introducing a Bill to prevent coercive loan recovery practices.

Microfinance players, including banks and non-banking financial companies, said that the checks and balances proposed in the Bill are likely to hinder micro-lending operations.

"It is not a conducive environment to work which puts so many checks and balances," said a senior executive of a small finance bank.

"As per the Bill, we cannot go for regular collection as we don't know what can constitute harassment and can land us in jails. Plus, (since) we are replacing moneylenders, we need to charge higher rates of interest, with the amount of risk involved in the segment."