New Delhi: The government plans to introduce a new Bill in the forthcoming budget session to regulate and develop microfinance institutions, to improve access of credit to the poor.

Microfinance institutions (MFIs) will be regulated by the National Bank for Agriculture and Rural Development (Nabard), which would frame lending, deposit and recovery methodologies for these institutions.

There will be stricter regulation for MFIs that accept deposits, while non-deposit institutions engaged in lending to self help groups would be least regulated said government sources.
There would be no cap on interest rates for lending by MFIs.

In the banking system, the cost of transactions is borne by borrowers, while in the case of micro-financing the cost of transaction is borne by micro credit institutions.

The MFI Bill will validate activities of MFIs like thrift collections, provide equity support, define microfinance services and give regulatory powers to Nabard.