Cabinet approves microfinance regulation bill

NEW DELHI Thu May 10, 2012 8:05pm IST

Tairabi Pathan, 40, who took a loan of rupees 10,000 from a micro finance company to start her own business, arranges her goods for sale at the side of a road in a slum area in Mumbai October 26, 2010. REUTERS/Danish Siddiqui/Files

Tairabi Pathan, 40, who took a loan of rupees 10,000 from a micro finance company to start her own business, arranges her goods for sale at the side of a road in a slum area in Mumbai October 26, 2010.

Credit: Reuters/Danish Siddiqui/Files

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NEW DELHI (Reuters) - The cabinet has approved a bill aimed to bring microlenders under the Reserve Bank of India's oversight, a minister, who declined to be named as the parliament is in session, said on Thursday.

The Microfinance Institutions (Development and Regulation) Bill needs parliament's approval to become a law.

Microlenders have been accused of aggressive lending and recovery practices and high interest rates, which attracted calls for regulation.

India's once-thriving microfinance sector was devastated by a crackdown more than a year ago by the government of Andhra Pradesh, which was the industry hub and largest market.

The state rules resulted in a drop off in loan collections and a drying up of funding for microlenders.

(Reporting by Nigam Prusty; editing by Malini Menon)

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