 the micro finance institutions (regulation of money lending) bill, 2016bydr manoj rajoria, mp———— arrangement of clauses———— clauses1 short title, extent and commencement 2 definitions3 registering authority for registration and regulation of micro finance institutions 4 functions of registering authority 5 register of micro finance institutions 6 cancellation of registration of micro finance institutions 7 member of self help group not to be member of more than one self help group 8 micro finance institutions not to seek security for loan 9 display of rates of interest charged by micro finance institutions10 maximum amount of interest recoverable on loans and discharge of loans in certaincases11 prior approval for grant of further loans to self help groups or their members 12 duty of micro finance institutions to maintain accounts and furnish copies 13 submission of monthly statement by micro finance institutions 14 power to require production of records or documents and power of entry, inspectionand seizure15 complaints 16 settlement of disputes between self help groups and micro finance institutions 17 penalty for coercive actions by micro finance institutions 18 penalty for carrying on business with registration 19 penalty for contravention of the provisions of the act 20 every officer to be public servant 21 bar of certain proceedings 22 power to remove difficulties 23 power to give directions 24 annual report 25 power to make rules bill no 201 of  2016 the micro finance institutions (regulation of money lending) bill, 2016 bydr manoj rajoria, mp a billto protect the women self help groups from exploitation by the micro finance institutions in the country and for matters connected therewith or incidental theretobe it enacted by parliament in the sixty-seventh year of the republic of india as follows:—1 (1) this act may be called the micro finance institutions (regulation of moneylending) act, 20165short title, extent and commencement(2) it shall come into force on such date as the central government may, by notificationin the official gazette, appoint2 in this act, unless the context otherwise requires,—definitions(i) ''appropriate government'' means in the case of a state, the government ofthat state and in all other cases, the central government;10(ii) 'interest' means a return on the amount lent by the micro finance institutionto a self help group;5(iii) 'loan' means an advance whether of money or in kind given to a self help group in consideration of interest, whether given before the commencement of this act or after such commencement and includes discount, money paid for or on account of or on behalf of or at the request of any person or any account, whatsoever and every agreement (whatever its terms or form may be) which is in substance or effect a loan of money or in kind given to a self help group and further includes, an agreement relating to the repayment of any such loan;1018 of 2013 2 of 1934 21 of 1860 2 of 1882 2 of 191215(iv) 'micro finance institution' means any person, partnership firm, group of persons, including a company registered under the provisions of the companies act, 2013, a non-banking financial company as defined under section 45-i of the reserve bank of india act, 1934, a society registered under the societies registration act, 1860, a trust created under the indian trust act, 1882, a co-operative society registered under the co-operative societies act, 1912 in whichever manner formed and by whatever name called, whose principal or incidental activity is to lend money or offer financial support of whatsoever nature to the low income population;(v)  'prescribed' means prescribed by rules made under this act;(vi) 'registering authority' means an authority constituted under section 3;(vii) 'registration' means registration granted to a micro finance institution under this act;20(viii) 'self help group' means a group of women formed on principles of self help and registered as such with the appropriate government; and(ix) ''self help group member'' means a registered member of a self help group who intends to avail a loan through such self help group253 the central government shall, by notification in the official gazette, constitute an authority to be known as the registering authority for the purpose of registration and regulation of micro finance institutions in every district of the countryregistering authority for registration and regulation of micro finance institutions functions of r e g i s t e r i n g authority304 (1) all micro finance institutions operating in the country shall, within thirty days from the date of commencement of this act, apply for registration before the registering authority of the district concerned specifying therein such details as may be prescribed(2) without prejudice to the generality of the foregoing provision such rules shall also provide for the name of villages or towns in which the micro finance institutions are operating or propose to operate, the rate of interest being charged or proposed to be charged, system of conducting due diligence and system of effecting recovery and list of persons who may be authorized for conducting the activity of lending or recovery of money which has been lent35(3) no micro finance institution operating at the commencement of this act or intending to start the business of lending money to self help groups after the commencement of this act shall grant any loan or recover any loan without obtaining registration under this act from the registering authority40(4) the registering authority shall verify the details furnished by the micro finance institution and accord registration in such manner as may be prescribed for operation of micro finance institutions for a period of not more than one year at a time(5) every micro finance institution shall submit a written undertaking declaring that it shall act in conformity with the provisions of this act45(6) every micro finance institution shall apply for renewal of registration at least sixty days before the expiry of the period of one year referred to in sub-section (4)(7) the registering authority, on receipt of an application for renewal of registration shall either grant or refuse to grant the renewal of registration within fifteen days before the date of expiry of registration, after due verification of the performance of the micro finance institutions at the field level and after hearing objections, if any, from the general public regarding extension of registration5| register      ||---------------|| micro finance || institutions |5 (1) every registering authority shall maintain for the area under its jurisdiction a register of all micro finance institutions having valid registration in such form as may be prescribed(2) the register maintained under sub-section (1) shall be published in such manner and at such intervals as may be prescribed106 (1) the registering authority may, at any time, either suo motu or upon receipt of complaints by self help groups or its members or by members of the public, cancel the registration of a micro finance institution after assigning sufficient reasons for such cancellation:cancellation of registration of micro finance institutionsprovided that no order of cancellation of the registration shall be passed without giving reasonable opportunity of being heard to the micro finance institution concerned15explanation: for the purposes of this section, conviction of a micro finance institution for an offence or violation of any of the provisions of this act shall be a sufficient cause for suspension or cancellation of its registration(2) the registering authority may, pending inquiry under sub-section (1), for sufficient reasons to be recorded, suspend the registration of a micro finance institution207 no person shall be a member of more than one self help group:provided that where a person is, at the commencement of this act, a member of more than one self  help group, such  person shall have the option to retain the membership of only one self  help group and terminate the membership in other self help groups:member of self help group not to be member of more than one self help group25provided further that where a person expresses his intention of termination of membership of a self help group, such member shall settle and pay the amount payable to the micro finance institutions within a period of three months from the date of commencement of this act8 no micro finance institution shall seek any security from a borrower by way of pawn, pledge or any other security for the loan:30micro finance institutions not to seek security forloanprovided that any such security obtained from a borrower before the commencement of this act shall forthwith stand released in favour of the borrower9 (1) all micro finance institutions shall display the rates of interest charged by them in a conspicuous place in their office premises in local language in bold letters visible to the members of the public35(2) no micro finance institution shall charge any other amount from the borrowerexcept any charge prescribed in the rules for submission of an application for grant of a loandisplay of rates of interest charged by micro finance institutions10 (1) no micro finance institution shall recover from the borrower towards interestin respect of any loans advanced by it, whether before or after commencement of this act, an amount in excess of the principal amount40maximum amount of interest recoverable on loans and discharge of loans in certain cases(2) all loans in respect of which a micro finance institution has realized from theborrower, whether before or after commencement of this act, an amount equal to twice the amount of the principal, shall stand discharged and the borrower shall be entitled to obtain refund and the micro finance institution shall be bound to refund the excess amount paid by the borrower4511 (1) no micro finance institution shall extend a further loan to a self  help group orits members, where the self help group has an outstanding loan from a bank unless the micro finance institution obtains the prior approval in writing in such manner as may be prescribed from the registering authority after making an application seeking such approvalprior approval for grant of further loans to self help groups or their members(2) the registering authority while considering such application from a micro finance institution seeking approval as aforesaid, shall secure the following information in writing from the micro finance institution in regard to every member of self  help group namely,—(i) name of the borrower;5(ii) name of the self  help group; (iii) bank from which loan has been obtained by the self help group; (iv) date of the loan granted by the bank; (v) amount paid to the self help group by the bank; (vi) amount due from the self help group;10(vii) fresh amount of loan sought by the self help group from the micro finance institution;(viii) terms of repayment proposed by the micro finance institution; (ix) details of due diligence including the capacity of the self help group for repayment; and15(x) such other details as may be prescribed by rules made under this act(3) the registering authority shall, not later than fifteen days from the date of filing of such application for approval under sub-section (2), cause an inquiry into the contents of the application  before granting approval to further loan20(4) if the registering authority is satisfied that the self help group and its members have passed a resolution that they have understood the conditions of the loan and terms of repayment and the registering authority is also satisfied that such further loan  may generate additional income to the self help group and its members for servicing the debt25(5) no micro finance institution shall grant loan to a member of self help group during the subsistence of two previous loans irrespective of the source of the previous two loans12 (1) all borrowings by a member of a self  help group from a micro finance institution shall be contracted in such manner, form and format, as may be prescribed(2) every micro finance institution shall keep and maintain a cash book, a ledger and such other books of account in such form and manner as may be prescribed30(3) every micro finance institution shall—duty of micro finance institutions to maintain accounts and furnish copies35(a) deliver or cause to be delivered, to the borrower within seven days from the date on which a loan is made, a statement in the prescribed form showing in clear and distinct terms the amount and date of the loan and of its maturity, the name and address of the functionary of the micro finance institution and the effective rate of interest charged;(b) upon repayment of a loan in full, obtain an indelible mark on every paper signed by the borrower with words indicating such repayment and provide copies thereof to the borrower40(4) no micro finance institution shall receive any payment from a borrower on account of any loan without giving him a duly signed receipt for the payment(5) every micro finance institution shall, on a demand in writing by the borrower, supply a copy of any document relating to a loan availed by the borrower, or if  the borrower so requires, to any person specified in that behalf in the demand:45provided that in respect of loans given prior to the commencement of this act, it shall be obligatory for the lender to specify if any security was accepted from the borrower(6) all tranches of repayment shall be made by the group at the office of the gram panchayat only5(7) no micro finance institution shall deploy any agent for recovery or use any other coercive action either by itself or by its agents for recovery of money from the borrower; and any form of coercive recovery including but not limited to visiting the house of the borrower shall, apart from being punishable under the provisions of this act, empower the registering authority to suspend or cancel the license of such micro finance institution13 every micro finance institution shall submit a monthly statement to the registering authority before 10th day of every month giving therein the list of borrowers, the loan given to each, the rate of interest charged on the loan and the repayment made1014 (1) the registering authority or any officer authorised by him in this behalf may, to verify whether the business of the micro finance institution is being carried on in accordance with the provisions of this act, enter the premises of the micro finance institution office or of any person who in his opinion is carrying on the business of lending and call upon him to produce any record or document relating to such business and every such micro finance institution shall allow such inspection and produce such record or document15submission of monthly statement by micro finance institutionspower to require production of records or documents and power of entry, inspection and seizure(2) the registering authority may, for the purpose of sub-section (1), search the premises and seize any record and document as may be necessary and the record or document seized shall be retained only for such period as may be necessary for the purposes of examination, prosecution or other legal action:2 of 197420provided that the provisions of sections 100 and 102 of the  code of criminal procedure,1973, shall, so far as may be, apply to such search and seizure(3) the registering authority or the other officer referred to in sub-section (1) shall also have power to summon and examine the micro finance institution or any person who in his opinion is in a position to furnish relevant informationcomplaints2515 (1) any self help group or its members or any member of the public may file a complaint regarding violation of the provision of this act by a micro finance institution before the registering authority(2) the authority, on receipt of a complaint, shall inquire into the same after giving a reasonable opportunity to the micro finance institution to show cause and pass such orders as it may deem fit3016 (1) for the protection of debtors and for the settlement of disputes of civil nature between the self  help group or its members on the one hand and the micro finance institution on the other hand or between the members of the self help group and the self help group, in relation to the loans granted under this act to the self help group or its members, the appropriate government after consultation with the high court, and by notification,—settlement ofdisputesbetween self help group and micro finance institution35| (                                               | a   | ) shall, as soon as may be after the commencement of this act, establish for   ||-------------------------------------------------|-----|--------------------------------------------------------------------------------|| every district in the state a fast-track court; |     |                                                                                || (                                               | b   | ) may establish fast-track court for such other areas in the state, as it may  || deem necessary                                 |     |                                                                                |40(2) the appropriate government shall, after due consultation with the high court concerned, specify, by notification, the local limits of the area to which the jurisdiction of a fast-track court shall extend and may, at any time, increase, reduce or alter such limits(3) the cases that may be filed before the fast-track court shall be disposed of within a period of three months5 of 190845(4) the decree of the fast-track courts shall be liable to be executed in accordance with the procedure under the code of civil procedure, 190817 (1) all persons who are connected with and responsible for the day-to-day control, business and management of a micro finance institution including the partners, directors and the employees who resort to any type of coercive measures against the self help groups or its members or their family members shall be punished with imprisonment for a term which may extend to three years or with fine which may extend to one lakh rupees or with bothpenalty for coercive actions by micro finance institutions50explanation:— for the purpose of this section, "coercive action" by a micro finance institution against the self  help groups or its members or their family members includes the following:—5(a) obstructing or using violence to, insulting or intimidating the borrower or her family members, or(b) persistently following the borrower or her family members from place to place or interfering with any property  owned, or used by her or depriving her of, or hindering her in, the use of any such property, or10(c) frequenting the house or other place where such other person resides or works, or carries on business, or happens to be, or(d) doing any act calculated to annoy or intimidate such person or the members of her family, or(e) moving or acting in a manner which causes or is calculated to cause alarm or danger to the person or property of such other person, or15(f) seeking to remove forcibly any document from the borrower which entitles the borrower to a benefit under any government programme: provided that a person who frequents the house or place referred to in clause (c) in order merely to obtain or communicate information shall not be deemed to be using coercive action20(2) the micro finance institution or the persons who use coercive actions shall be prosecuted in accordance with the provisions of this act2 of 1974(3) the provisions of the code of criminal procedure, 1973, shall, so far as may be, apply to the proceedings before a fast-track court, and for the purpose of the said provisions, a fast-track court shall be deemed to be a magistrate25penalty for carrying on business without registration18 all persons who are connected with and responsible for the day-to-day control, business and management of a micro finance institution, including the partners and directors of institution, which carries on the business of providing loans without obtaining registration from the registering authority shall be punished with imprisonment for a term which may extend to three years and with fine which may extend to one lakh rupees3019 if any person contravenes any provision other than those of sections 4, 17 and 18of this act, he shall be punished with imprisonment for a term of six months or with fine which may extend to ten thousand rupees or with bothpenalty for contravention of the provisions of the act every officer to be public servant45 of 18603520 every officer of the government and every person acting under the provisions of this act shall be deemed to be a public servant within the meaning of section 21 of the indian penal code, 1860bar on certain proceedings21 (1) no suit, prosecution or other proceedings shall lie against any officer or employeeof the government for any act done or purporting to be done under this act, without the previous sanction of the government40(2) no suit, prosecution or other legal proceedings shall be instituted against anyperson for anything which is, in good faith, done or intended to be done under this act or the rules made thereunderpower to remove difficulties22 if any difficulty arises in giving effect to the provisions of this act, the governmentmay, by notification, remove difficulties by orders not inconsistent with the provisions of this act, but which appear to them to be necessary or expedient to remove such difficulty:45provided that no such order shall be made after the expiry of a period of three years,from the date of commencement of this actpower to give directions23 the government may, from time to time, issue such orders, instructions anddirections not inconsistent with the provisions of this act and the rules made thereunder tothe officers for the proper administration of the act, and such officers and all other persons employed in the enforcement of the act, shall comply with such orders, instructions and directionsannual report524 the central government shall prepare an annual report, in such form and manner, as may be prescribed, on the administration of this act and cause the same to be laid before each house of parliament| power       ||-------------|| make rules |25 (1) the central government may, by notification in the official gazette, make rules for carrying out the purposes of this act10 15(2) every rule made under this act shall be laid, as soon as may be after it is made,before each house of parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following session or the successive sessions aforesaid, both houses agree in making any modification in the rule or both the houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, so, as the case may be; so however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule statement of objects and reasonsthe state governments have made rapid strides in the field of financial inclusion of the rural and urban poor by organising women self  help groups (shg) and linking them with the banks for meeting their credit needshowever, of late, many individuals and other entities have come up styling themselves as micro finance institutions and are giving loans to self help groups at very high or usurious rates of interest and are using inhuman coercive methods for recovery of the loans this has even resulted in suicides by many rural poor who have obtained loans from such individuals or entitiesin the larger public interest and to protect the poor from exploitation, and to regulate the lending of monies to the self  help groups by the micro finance institutions, it is urgently required to bring forward a suitable legislation to check the illegal acts of these micro finance institutions across the countrythis bill seeks to achieve the above objectives financial memorandumclause 3 of the bill provides that the central government shall constitute an authority to be known as the registering authority in every district for the purpose of registration and regulation of micro finance institutions clause 5 provides for maintenance of a register of micro finance institutions by the registering authority clause 16 provides for establishment of  fast-track court in every district in the state the bill, therefore, if enacted, would involve expenditure from the consolidated fund of  india it is likely to involve about rupees one hundred crore as recurring expenditure per annuma non-recurring expenditure of about rupees one hundred crore is also likely to be involved memorandum regarding delegated legislationclause 25 of the bill empowers the central government to make rules for carrying out the purposes of the bill as the rules will relate to matters of detail only, the delegation of legislative power is of a normal character lok sabha————— a billto protect the women self help groups from exploitation by the micro finance institutions in the country and for matters connected therewith or incidental thereto————(dr manoj rajoria,  mp)gmgipmrnd—1454ls(s3)—26072016