Bolting the doors after the studs left.

Close on the heels of AP government coming out with an ordinance to tackle the predatory practicles of micro finance institutions (MFIs), the Reserve Bank of India (RBI) on Friday announced the constitution of a sub-committee to look into the functioning of MFIs. RBI governor D Subbarao, however, did not commit to come out with any regulations to deal with MFIs. “I cannot really speculate on regulations,” he told reporters after the meeting of the central bank’s board.

RBI’s move has come a day after the AP cabinet approved an ordinance providing for a three year sentence and Rs 1 lakh penalty for MFIs harassing borrowers for recovery of loans. “We discussed the AP ordinance as well as what really falls under RBI (purview),” Subbarao said.

Stating that RBI regulates Non-Banking Finance Company (NBFCs), he, however, said that there wer a vast number of companies under MFI sector falling out of the purview of apex bank, adding that RBI does not regulate the interest rate of a large number of MFIs. A bill to regulate MFIs is also being prepared to be tabled in Parliament. (via RBI panel to examine functioning of MFIs – The Times of India.

The micro becomes macro while poor remain poor. Sahara started as micro and now it is macro! Who will enforce? Just as it could stop private money landing.