Microfinance in India Long Way to go

The paper throws light on microcredit in India and under given circumstances it would survive or not. It started as small groups formed to help themselves or the self help groups. One of the benefits is that it is very accessible. Banks don't provide loans to those with little to no assets, and generally don't give small size loans. The borrowing increased year after year and low income groups were supported as much as possible. There are many challenges within microfinance initiatives which may be social, financial, administrative and political. Here, some community members may cheat poorer or less-educated borrowers. But increasing default cases alarmed Microfinance Institutions to get hold of flaws in the system. Microfinance Institutions (Development and Regulation) Bill 2012 was introduced with a view to monitor the sector. The Bill was needed to strengthen the regulatory framework and consumer protection norms of the microfinance industry in India. An ordinance was made after a series of suicide incidents as a result of abusive practices of MFIs such as charging high interest rates, adopting coercive collection practices and lending aggressively beyond the repayment capacity of the borrowers rather than helping the poor get out of poverty. Policy makers must make strategies to help MFIs and borrowers as well. Repayment is less because of the loopholes in the lending procedures. Hopefully Standing Committee on Finance pays sufficient attention to these critical issues.