Announcing this on behalf of the industry, Vijay Mahajan, chief executive officer, BASIX, said here on Tuesday that the leading MFIs operating in the state have formed a group and decided to adopt a voluntary code of conduct. The code will come into force with immediate effect, he added.
"We (MFIs) will instruct our loan recovery staff not to use abusive language or coercive techniques in the process of loan recovery," Mr Mahajan said. If they do so, they will be dismissed from service, he added.
Interestingly, Mr Mahajan said that except two MFIs - Spandana and SHARE - other MFIs are not known to them and they may be fly-by-night operators. "MFIs are governed by the RBI norms and I cannot speak about these unknown MFIs like Undamma Bottu Pedatha, etc." he said.
Further, Mr Mahajan has categorically refused the suggestion from Chief Minister YS Rajasekhare Reddy that they should offer loans at 3% to the members of self-help groups. "Our effective cost (inclusive of 1-2% profit) would be 24% and we cannot provide loans below this rate," Mr Mahajan said.
Commenting on the action being taken by the government, Mr Mahajan felt that they acted in haste. The administration had not tried to find out from us what had happened at the ground level, Mr Mahajan complained. "Even we have tried to approach them for the last three days but failed to obtain an appointment from any of the officials," he pointed out.
To recall, the district administrations of Krishna and Guntur had seized over 50 offices of both Spandana and SHARE for arm-twisting practices to recover the loans. The officials have also seized the records of these institutions. In this regard, the industry wants to have a proper dialogue with the government and the Chief Minister to clear doubts on MFIs. "In fact, we have to have a meeting with the officials along with RBI and MoF officials to clear the doubts in the minds of the administration," Mr Mahajan said.
Earlier, Sa-Dhan, a national body of MFIs, executive director Mathew Titus said that out of 150 registered member MFIs, only about 73 are adopting the standards being proposed by the association. "We want them to adopt the standards and report to the association," Mr Titus said. He assured that their association and its members will work with the government in curbing fly-by-night operators.