LexThe Andhra Pradesh Micro Finance Institutions (Regulation of Money Lending) Act, 2011
Andhra Pradesh · state statute
Open in Lexace · Ask the AI about this actANDHRA PRADESH MICRO FINANCE INSTITUTIONS (REGULATION OF
MONEY LENDING) ACT, 2011
(ACT NO. 1 OF 2011)
ARRANGEMENT OF SECTIONS
SECTIONS
1. Short title, extent and commencement
2. Definitions
3. Register of MFIs
4. Register of MFIs
5. Power to suspend/ cancel registration
6. Member of SHG not to be member of more than one SHG
7. MFIs not to seek security for loan
8. Display of rates of interest charged by MFIs
9. Maximum amount of interest recoverable on loans and discharge of
loans in certain cases
10. Prior approval for grant of further loans to SHGs or their members
11. Duty of MFIs to maintain accounts and furnish copies
12. Submissions of monthly statement by MFIs
13. Power to require production of records or documents and power of
entry, inspection and seizure
14. Complaints
15. Settlement of Disputes
16. Penalty for coercive actions MFIs
17. Penalty for carrying on business without registration
18. Penalty for contravention of the provisions of the Act
19. Every officer to be public servant
20. Bar of certain proceedings
21. Power to remove difficulties
22. Power to give directions
23. Power to make rules
24. Annual Report on the administration of the Act
25. Repeal of Ordinance 9 of 2010
ANDHRA PRADESH MICRO FINANCE INSTITUTIONS (REGULATION OF
MONEY LENDING) ACT, 2011
(ACT NO. 1 OF 2011)
[01 January, 2011]
AN ACT TO PROTECT THE WOMEN SELF HELP GROUPS FROM
EXPLOITATION BY THE MICRO FINANCE INSTITUTIONS IN THE STATE
OF ANDHRA PRADESH AND FOR THE MATTERS CONNECTED
THEREWITH OR INCIDENTAL THERETO.
Whereas, Government of Andhra Pradesh has facilitated organization of
the below poverty line households into Self Help Groups (SHG) for the purpose
of their economic advancement by achieving financial inclusion through linking
with the banking network;
And whereas the endeavor of the State is to protect the interests of SHGs
and relieve them from the undue hardship by regulating money lending
transactions by the money lending MFIs, who are providing loans to SHGs with
usurious interest rates and resorting to coercive means of recovery resulting in
impoverishment and at times leading to suicides of the borrowers.
BE it enacted by the Legislature of the State of Andhra Pradesh in the
Sixty first year of the Republic of India as follows:-
1. Short title, extent and commencement. - (1) This Act may be called the
Andhra Pradesh Micro Finance Institutions (Regulation of Money Lending) Act,
2011.
(2) It extends to the whole of the State of Andhra Pradesh.
(3) It shall be deemed to have come into force with effect from the 15th
October, 2010.
(4) It shall apply to Micro Finance Institutions whether they had come
into existence before or after the commencement of this Act.
2. Definitions. - In this Act, unless the context otherwise requires,-
(a) 'Government' means the State Government of Andhra Pradesh;
(b) 'Interest' for the purposes of the terms defined under the provisions
of this Act would mean a return on the amount lent by the MFI to a SHG;
(c) 'Loan' means an advance whether of money or in kind given to the
borrowing SHG at interest, whether given before the commencement of this Act
or after such commencement and includes advance, discount, money paid for
or on account of or paid 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 an SHG and
further includes, an agreement relating to the repayment of any such loan;
(d) 'Micro Finance Institut ion (MFI)' means any person, partnership
firm, group of persons, including a Company registered under the provisions of
the Companies Act 1956, (Central Act 1 of 1956) a Non -Banking Finance
Company as defined under the Reserve Bank of India Act, 1934, (Cen tral Act 2
of 1934) a Society registered under the Andhra Pradesh Co -operative Societies
Act, 1964, (Act 7 of 1964) or the Andhra Pradesh Societies Registration Act,
2001 (Act 35 of 2001) and the like, 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 below poverty line
population;
(e) 'Notification' means a notification published in the Andhra Pradesh
Gazette and the word 'notified' shall be construed accordingly;
(f) 'Prescribed' means prescribed by rules made by Government under
this Act;
(g) 'Registering Authority' means the Project Director, District Rural
Development Agency for the rural areas and Project Director, MEPMA for
Urban areas; or any other person appointed by the District Collector to perform
the functions of a registering authority under this Act for such District;
(h) 'Registration' means registration granted to a MFI under this Act;
(i) 'Self Help Group (SHG)' means a group of women formed on
principles of self help and registered as such with the Society for Elimination of
Rural Poverty (SERP) in the rural areas or Mission for Elimination of Urban
Poverty in Municipal areas (MEPMA) in urban areas;
(j) 'SHG bank link age' means provision of credit for the SHGs by the
commercial banks based on a micro credit plan prepared by the SHGs for
carrying out economic activities;
(k) 'SHG Member' means a registered member of a SHG who intends to
avail a loan through such SHG an d thus a borrower under the provisions of
this Act;
(l) 'Society for Elimination of Rural Poverty (SERP)' is a Society
formed by Government for the purpose of implementing pro-poor initiatives and
thereby eliminating poverty in rual areas;
(m) 'Society u nder Mission for eliminating poverty in municipal
areas (MEPMA)' is a Society formed by Government for the purpose of
implementing pro -poor initiatives and thereby eliminating poverty in urban
areas;
(n) Words used but not defined in this Act, shall have the same meaning
assigned to them under the relevant Acts.
3. Register of MFIs. - (1) All Micro Finance Institutions operating in the State
of Andhra Pradesh as on the date of the commencement of this Act, shall
within thirty days from the date of commence ment of this Act, apply for
registration before the Registering Authority of the district specifying therein
the villages or towns in which they have been 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
authorized for conducting the activity of lending or recovery of money which
has been lent.
(2) No MFIs, operating at the commencement of this Act or intending to
start the business of lending money to SHGs, after the commencement of this
Act, shall grant any loans or recover any loans without obtaining registration
under this Act from the Registering Authority.
(3) The Registering Authority shall conduct verification of the details
furnished by the MFI and accord registration in such manner as may be
prescribed for operation of MFIs for a period of one year, after obtaining a
written undertaking from the MFI that it shall always act in conformity with
the provisions of this Act.
(4) Where the MFI applies for renewal of registration, an application for
that purpose shall be filed by the MFI within sixty days before the expiry of the
period of one year referred to in sub -section (3) and the Registering Authority
shall decide e ither to grant renewal or refuse renewal of registration within
fifteen days before the date of expiry of registration, after due verification of the
performance of the MFIs in the field level and after hearing objections, if any,
from the general public regarding extension of Registration.
4. Register of MFIs. - (1) Every registering authority shall maintain for the
area under its jurisdiction registers of all MFIs having valid registration in such
form as may be prescribed.
(2) The registers maintained under sub-section (1) shall be published in
such manner and at such intervals as may be prescribed.
5. Power to suspend/ cancel registration. - (1) The Registering Authority
may, at any time, either suo moto or upon receipt of complaints by SHGs or its
members or by members of the public cancel the registration of an MFI after
assigning sufficient reasons for such cancellation:
Provided that no order of cancellation of the Registration shall be passed
without issuing notice to the MFI intimating the facts upon which the prima-
facie decision to cancel the registration has been taken and the MFI shall be
afforded a reasonable opportunity to show cause against such notice.
Explanation. - For the purposes of sub -section (1), conviction of a MFI for an
offence of violation of any of the provisions of this Act shall be sufficient cause
for suspension or cancellation of its registration.
(2) Pending enquiry under sub-section (1), the Registering Authority may,
for sufficient reasons to be recorded, suspend the registration, of an MFI.
6.Member of SHG not to be member of more than one SHG - No member of
an SHG shall be a member of more than one SHG, provided that where a
member has, at the commencement of this Act, become a member of more than
one SHG, she shall ha ve the option to retain the membership of one SHG and
to terminate her membership in other SHGs and for that purpose, she shall
issue a notice to such SHGs about her option to terminate her membership,
settle and pay the amount payable to the MFIs which ha d lent monies to such
SHGs, within a period of three months from the date of commencement of this
Act.
7. MFIs not to seek security for loan. - No MFI shall seek any security from a
borrower by way of pawn, pledge or other security for the loan:
Provided that any such security obtained from a borrower before the
commencement of this Act shall forthwith stand released in favour of the
borrower.
8. Display of rates of interest charged by MFIs. - (1) All MFIs shall display
the rates of interest charged by the m in a conspicuous place in their premises
in bold letters visible to the members of the public.
(2) No MFI shall charge any other amount from the borrower except any
charge prescribed in the rules for submission of an application for grant of a
loan.
9. Maximum amount of interest recoverable on loans and discharge of
loans in certain cases. - (1) No MFI shall recover from the borrower towards
interest in respect of any loans advanced by it, whether before or after
commencement of this Act, an amount in excess of the principal amount.
(2) All loans in respect of which an MFI has realized from the borrower,
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 MFI shall be bound to refund the excess
amount paid by the borrower.
10. Prior approval for grant of further loans to SHGs or their members. -
(1) No MFI shall extend a further loan to a SHG or its members where the SHG
has an outstanding loan from a Bank unless the MFI obtains the prior approval
in writing in such manner as may be prescribed from the Registering Authority
after making an application seeking such approval.
(2) The Registering Authority while considering such application from an
MFI seeking approval as aforesaid, shall secure the following information in
writing from the MFI in regard to every member of SHG namely; -
(i) name of the Borrower;
(ii) name of the SHG;
(iii) bank from which loan has been obtained by the SHG;
(iv) date of the loan granted by the bank;
(v) amount paid to the SHG by the bank;
(vi) amount due from the SHG;
(vii) fresh amount of loan sought by the SHG from the MFI;
(viii) terms of repayment proposed by the MFI;
(ix) details of due di ligence including the capacity of the SHG for
repayment; and
(x) such other details as may be prescribed.
(3) The Registering Authority shall, not later than fifteen days from the
date of filing of such application for approval under sub -section (2), caus e an
enquiry into the contents of the application and shall grant approval for further
loan unless the Registering Authority is satisfied that the SHG and its
members have passed a resolution that they have understood the conditions of
the loan and terms o f repayment and unless the Registering Authority is also
satisfied that such further loan would generate additional income to the SHG
and its members, needed for servicing the debt.
(4) No MFI shall grant loan to a member of SHG during the subsistence
of two previous loans irrespective of the source of the previous two loans.
11. Duty of MFIs to maintain accounts and furnish copies. - (1) All
borrowings by a member of an SHG from an MFI shall be contracted in the
manner, form and format prescribed under the Act.
(2) Every MFI shall keep and maintain a cash book, a ledger and such
other books of account in such form and in such manner as may be
prescribed.
(3) Every MFI shall, -
(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 MFI and the effective
rate of interest charged;
(b) upon repayment of a loan in full, the MFI shall obtain an
indelible mark on every paper signed by the borrower with words indicating
such repayment and provide copies thereof to the borrower.
(4) No MFI shall receive any payment from a borrower on acc ount of any
loan without giving him a duly signed receipt for the payment.
(5) An MFI shall, on a demand in writing by the borrower, supply a copy
of any document relating to a loan obtained by him, or if the borrower so
requires, to any person specified in that behalf in the demand:
Provided 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 t he SHG or its members
at the office of the Gram Panchayat or at a public place designated by the
District Collectors only.
(7) MFI shall not deploy any agents for recovery nor shall use any other
coercive action either by itself or by its agents for recov ery of money from the
borrower; and any form of coercive recovery including but not limited to visiting
the house of the borrower shall, apart being punishable under the provisions of
the Act, empower the Registering Authority to suspend or cancel the lice nse of
such an MFI as provided in section 5.
12. Submissions of monthly statement by MFIs - Every MFI 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 and the interest rate
charged on the repayment made.
13. Power to require production of records or documents and power of
entry, inspection and seizure - (1) The Registering Authority or any officer
authorised by him in this behalf may, to verify whether t he business of the MFI
is being carried on in accordance with the provisions of this Act, enter the
premises of the MFI 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 MFI shall allow such inspection and
produce such record or document.
(2) The Registering Authority may, for the purposes 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:
Provided that the provisions of sections 100 and 102 of the Code of
Criminal Procedure, 1973 (Central Act 2 of 1974) 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 MFI or any person who
in his opinion is in a position to furnish relevant information.
14. Complaints - Any SHG or its members or any member of the public can
file a complaint regarding violation of the provision of this Act by a MFI before
the Registering Authority and the said Authority shall enqu ire into the same
after giving a reasonable opportunity to the MFI to show cause and pass such
orders as it may deem fit including an order under section 5 of the Act.
15. Settlement of Disputes - (1) For the protection of debtors and for the
settlement of disputes of civil nature between the SHG or its members on the
one hand and the MFI on the other hand or between the members of the SHG
and the SHG, in relation to the loans granted under this Act to the SHG or its
members, the State Government after consultation with the High Court, and by
notification,-
(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.
(2) The Government shall, after consultation with the High Court of
Andhra Pradesh 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 with in a period of three months.
(4) The decree of the Fast Track Courts shall be liable to be executed in
accordance with the procedure under t he Code of the Civil Procedure 1908
(Central Act 5 of 1908).
16. Penalty for coercive actions MFIs - (1) All persons who are connected
with and responsible for the day-to-day control, business and management of a
MFI including the Partners, Directors and the employees who resort to any type
of coercive measures against the SHGs or its members or their family members
shall be liable for punishment of imprisonment which may extend up to a
period of three years or with fine which may extend to one lakh rupees or with
both.
Explanation. - For the purposes of this section, "coercive action" by an MFI
against the SHGs or its members of their family members include the
following,-
(a) obstructing or using violence to, insulting or intimidating the
borrower or his family members, or
(b) persistently following the borrower or his family member from
place to place or interfering with any property owned or used by him or
depriving him of, or hindering him in the use of any such property, or
(c) frequenting the hou se 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 his family, or
(e) moving or acting in a manner which causes or i s calculated to
cause alarm or danger to the person or property of such other person, or
(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 fr equents the house or place referred to in
clause in order merely to obtain or communicate information shall not be
deemed to be using coercive action.
(2) The MFI or the persons who use coercive actions as stated in sub -
section (1) shall be prosecuted in accordance with the provisions of this Act.
(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 d eemed to be a
Magistrate.
17. Penalty for carrying on business without registration - All persons who
are connected with and responsible for the day -to-day control, business and
management of a MFI including the Partners and Directors of such MFI which
carries on the business of providing loans either without obtaining registration
of the MFI from the Registering Authority under section 3 or extending a
further loan without prior approval under sub -section (1) of section 10 of the
Act or granting loan in violation of sub -section (4) thereof, shall be liable for
punishment with imprisonment for a term which may extend to three years
and with fine which may extend to rupees one lakh.
18. Penalty for contravention of the provisions of the Act - Any person who
contravenes any provision other than section 3 and section 16 of this Act, shall
be punishable with imprisonment for a period of six months or with fine which
may extend to ten thousand rupees or with both.
19. Every officer to be public servant - 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, 1860
(Central Act 45 of 1860).
20. Bar of certain proceedings - (1) No suit, prosecution or other proceedings
shall lie against any officer or employee of the Government for any act done or
purporting to be done under this Act, without the previous sanction of the
Government.
(2) No suit, prosecution or other legal proceedings s hall be instituted
against any person for anything which is, in good faith, done or intended to be
done under this Act or the rules made thereunder.
21. Power to remove difficulties - If any difficulty arises in giving effect to the
provisions of this Act, the Government may, 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.
22. Power to give directions - The Government may, from ti me to time, issue
such orders, instructions and directions not inconsistent with the provisions of
this Act and the rules made thereunder to the officers for the proper
administration of the Act, and such officers and all other persons employed in
the enfo rcement of the Act, shall comply with such orders, instructions and
directions.
23. Power to make rules - (1) The State Government may, by notification,
make rules for carrying out the purposes of this Act.
(2) Every rule made under this Act shall, immedi ately after it is made, be
laid before the Legislature of the State, if it is in session and if it is not in
session, in the session immediately following for a total period of fourteen days
which may be comprised in one session or in two successive sessio ns and if,
before the expiration of the session in which it is so laid or the session
immediately following the Legislature agrees in making any modification in the
rule or in the annulment of the rule, the rule shall, from the date on which the
modification or annulment is notified, have effect only in such modified form or
shall stand annulled 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 the rule.
24. Annual Report on the administration of the Act - The Government shall
prepare an annual report on the administration of this Act and the same shall
be placed before the State Legislature.
25. Repeal of Ordinance 9 of 2010 - The Andhra Pradesh Micro Finance
Institutions (Regulation of Money Lending) Ordinance, 2010 is hereby repealed.
A. SHANKAR NARAYANA,
Secretary to Government,
Legislative Affairs & Justice,
Law Department