LexThe Telangana Micro Finance Institutions (Regulation of Money Lending) Act, 2011.
Telangana · state statute
Open in Lexace · Ask the AI about this actTHE TELANGANA 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. Registration 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 against MFIs.
17. Penalty for carrying on business without registration.
2 [Act No. 1 of 2011]
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.
THE TELANGANA MICRO FINANCE INSTITUTIONS
(REGULATION OF MONEY LENDING) ACT, 2011.1
ACT No. 1 OF 2011.
CHAPTER-I
PRELIMINARY
1. (1) This Act may be called the 2Telangana Micro
Finance Institutions (Regulation of Money Lending) Act,
2011.
(2) It extends to the whole of the State of 2Telangana.
(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. In this Act, unless the context otherwise requires,-
(a) „Government‟ means the State Government of
2Telangana;
(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;
1. The Andhra Pradesh Micro Finance Institutions (Regulation of Money
Lending) Act, 2011 received the assent of the Governor on 31.12.2010.
The said Act in force in the combined State, as on 02.06.2014, has been
adapted to the State of Telangana, under sec tion 101 of the Andhra
Pradesh Reorganisation Act, 2014 (Central Act 6 of 2014) vide. the
Telangana Adaptation of Laws Order, 2016, issued in G.O.Ms.No.45,
Law (F) Department, dated 01.06.2016.
2. Substituted by G.O.Ms.No.45, Law (F) Department, dated 01.06.2016.
Short title, extent
and
commencement.
Definitions.
2 [Act No.1 of 2011]
(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 incl udes 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 of in kind given to
an SHG and further includes, an agreement relating to the
repayment of any such loan;
(d) „Micro Finance Instituiion (MFI) ‟ means any person,
partnership firm, group of persons, including a Company
registered under the provisions of the 3Companies Act 1956,
a Non -Banking Finance Company as defined under the
Reserve Bank of India Act, 1934, a Society registered under
4the Telangana Co -operative Societies Act, 1964, or 5the
Telangana Societies Registration Act, 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 notificat ion published in the
6Telangana Gazette and the word „notified‟ shall be
construed accordingly;
(f) „Prescribed‟ means prescribed by rules made by
Government under this Act;
3. Please also see now relevant provisions of the Companies Act, 2013
(Central Act No.18 of 2013).
4. Adap ted by G.O.Ms.No.53, Agriculture & Co -operation (Coop.II)
Department, dated 20.05.2016.
5. Adapted by G.O.Ms.No.20, Revenue (Regn - II) Depart ment, dated
18.08.2014.
6. Substituted by G.O.Ms.No.45, Law (F) Department, dated 01.06.2016.
Central Act 1 of 1956.
Central Act 2 of 1934.
Act 7 of 1964.
Act 35 of 2001.
[Act No.1 of 2011] 3
(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 registeiing a uthority 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 E limination of Urban Poverty in
municipal areas (MEPMA) in urban areas;
(j) „SHG bank linkage‟ 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 and
thus a borrower under the provisions of this Act;
(l) „Society for Elimination of Rural P overty (SERP)‟ is a
Society formed by Government for the purpose of
implementing pro -poor initiatives and thereby eliminating
poverty in rual areas;
(m) „Society under Mission for eliminating pov erty 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;
4 [Act No.1 of 2011]
(n) Words used but not defined in this Act, shall have
the same meaning assigned to them under the relevant
Acts.
3. (1) All Micro Finance Institutions operating in the State
of 7Telangana as on the date of the commencement of this
Act, shall within thirty days from the date of commencement
of this Act, ap ply for registration before the Registering
Authority of the district specifying therein the villages or
towns in which they have been opera ting or propose to
operate, the rate of interest being charged or proposed to
be charged, system of conducting du e diligence and
system of effect ing recovery and list o f persons authorized
for conducting the activity of lending or recovery of money
which has been lent.
(2) No MF Is, operating at the commencemen t 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 A uthority shall conduct verificat ion
of the details furnished by the MFI and accord registration in
such manner as may be prescribed for operation of MFls for
a period of one year, after obtaining a wr itten undertaking
from the MFI tha t it shall always act in conformity with the
provisions of this Act.
(4) Where the MFI applies for rene wal of registration,
an applicat ion 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 either to grant renewal or refuse renewal of
registration within fifteen days before the date of expiry of
7. Substituted by G.O.Ms.No.45, Law (F) Department, dated 01.06.2016.
Registration of
MFIs.
[Act No.1 of 2011] 5
registration, after due verifica tion of the performance of the
MFls in the field level and after hearing objections, if any,
from the general public regarding extension of Registration.
4. (1) Every registering authority shall maintain for the
area under its jurisdiction regist ers of all MFls 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. (1) The Registering Authority may, at any time, either
suo mot u or upon receipt of complaints by SHGs or its
members or by members of the publ ic cancel the
registration of an MFI after assigning sufficient reasons for
such cancellation:
Provided that no ord er of cancellation of the
registration shall be passed without issuing notice to the MFI
intimating the fac ts 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 enqu iry under sub -section (1), the
Registering Authority may, for sufficient reasons to be
recorded, suspend the registration, of an MFI.
6. No member of an SHG shall be a member of more than
one SHG, pro vided that where a member has, at the
commencement of this Act, become a member of more than
Register of MFIs.
Power to
suspend/cancel
registration.
Member of SHG
not to be member
of more than one
SHG.
6 [Act No.1 of 2011]
one SHG, she shall have 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 MFls
which had lent monies to such SHGs, within a period of
three months from the date of commencement of this Act.
7. No MFI shall seek any secur ity 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. (1) All MFls shall display the rates of interest charged
by them 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. (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 af ter 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.
MFIs not to seek
security for loan.
Display of rates of
interest charged
by MFIs.
Maximum amount
of interest
recoverable on
loans and
discharge of loans
in certain cases.
[Act No.1 of 2011] 7
10. (1) No MFI shall extend a further loan to a S HG 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 prescrib ed 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 sha ll
secure the following informat ion 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 diligence 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), cause an enquiry into the contents of
Prior approval for
grant of further
loans to SHGs or
their members.
8 [Act No.1 of 2011]
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 of
repayment and unless the Registering Authority is also
satisfied that such further loan wo uld 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. (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 e very paper signed by the
borrower with words indicating such repayment and provide
copies thereof to the borrower.
Duty of MFIs to
maintain accounts
and furnish
copies.
[Act No.1 of 2011] 9
(4) No MFI shall receive any payment from a borrower
on account 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 the
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 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 being punishable
under the provisions of the Act, empower the Registeiing
Authortty to suspend or cancel the licen ce of such an MFI
as provided in section 5.
12. Every MFI shall su bmit 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. (1) The Registering Authority or any officer authorised
by him in this behalf may, to verify whether the 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
Submissions of
monthly statement
by MFIs.
Power to require
production of
records or
documents and
power of entry,
inspection and
seizure.
10 [Act No.1 of 2011]
of lending and call upon him to produce an y record or
document relating to such business and every such MFI
shall allow such in spection 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 s uch period as
may be necessary for the purposes of examina tion,
prosecution or other legal action:
Provided 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 MFI or any person who in his opinion is in a
position to furnish relevant information.
14. Any SHG or its members or any member of the
public can file a comp laint regarding violation of the
provision of this Act by a MFI before the Registering
Authority and the said Authority shall enquire 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. (1) For the protection of debtors and for the settlement
of disputes of ci vil 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 t he High Court,
and by notification,-
Complaints.
Central Act 2 of 1974.
Settlement of
Disputes.
[Act No.1 of 2011] 11
(a) shall, as soon as may be after the commencement
of this Act, establ ish for every district in the State a Fast -
Track Court;
(b) may estabiish 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 notifica tion, 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 months.
(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, 1908.
16. (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
Penalty for
coercive actions
against MFIs.
Central Act 5 of 1908.
12 [Act No.1 of 2011]
(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 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 his family, or
(e) moving or acting in a manner which causes o r is
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 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 action.
(2) The MFI or the persons who use coercive actions as
stated in sub section (1) shall be pro secuted 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 t o the proceedings
before a Fast -Track Court, and for the purpose of the said
provisions, a Fast -Track Cour t shall be deemed to be a
Magistrate.
[Act No.1 of 2011] 13
17. All persons who are connected with and responsible
for the day -to-day control, business and managem ent 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. Any person who contr avenes 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 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.
20. (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, prosecutio n or other legal proceedings
shall 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. If any difficulty arises in giving effe ct 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.
Penalty for
carrying on
business without
registration.
Penalty for
contravention of
the provisions of
the Act.
Every officer to be
public servant.
Central Act 45 of 1860.
Bar of certain
proceedings.
Power to remove
difficulties.
14 [Act No.1 of 2011]
22. The Government may, from time 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 on the Act, and such
officers and all other persons employed in the enforcement
of the Act, shall comply with such orders, instructions and
directions.
23. (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, immediately
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 compri sed in one session or in two
successive sessions 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. The Government shall prepare an annual report on the
administration of this Act and the same shall be placed
before the State Legislature.
25. The Andhra Pradesh Micro Finance Institutions
(Regulation of Money Lending) Ordinance, 2010 is hereby
repealed.
* * *
Power to give
directions.
Power to make
rules.
Annual Report on
the administration
of the Act.
Repeal of
Ordinance 9 of
2010.