One of the fears of the proposed MFI bill is that it will override the powers of the state governments, since the bill proposes RBI to be the regulator of MFIs. Earlier provision under Malegam Committee recommendations was that only NBFCs registered as MFIs would come under the jurisdiction of RBI and others smaller plays would continue to be the part of state govt’s jurisdiction. For example, last year Andhra Pradesh (hub of MFI activities with almost 1/4th of the MFI industry concentrated in the state) came out with its own ordinance capping various activities of MFIs in the backdrop of a number of suicides in the state.
However RBI has tried to allay such fears and has stated that it has no intention of overriding powers of the elected state govts. It needs to be seen how RBI balances powers given to it sunder the Bill and the policies as adopted by the state govt.
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