NEW DELHI, March 5: India`s government plans legislation to crack down on microfinance institutions to
stop them charging exorbitant interest rates, a finance ministry official says.
Legislation, sparked by a string of suicides by impoverished borrowers, is expected to come before
lawmakers this year, the finance ministry official said late on Friday, asking not to be named.
“There will be a cap on interest rates,” the official said.
Microlenders, such as India`s largest SKS Microfinance, give loans as low as $20 to small business and
farmers but have been accused of charging excessively high rates and using aggressive tactics to recover
money from borrowers.
The new legislation is expected to be modelled on recommendations of a central bank panel which said its
proposed changes would bring a “new dawn” to the troubled sector.
The bank panel proposed capping interest rates at 24 per cent.
