The Chief Minister reiterated that the State Government will crack the whip on MFIs which are using arm twisting methods to lend money at higher interest rates and recover loans from the rural poor and even the SHG members. He reminded the MFIs that the arm of the law is long and the Government knows how to curb their activities and save the poor from their unauthorised activities. Dr. Rosaiah held a meeting with Rural Development Minister Vatti Vasantha Kumar, Chief Secretary, S V Prasad and other top officials on the steps to be taken to curb the illegal and unauthorised activities of the MFIs before leaving for Vijayawada and asked the CS to initiate immediate steps in this regard.

The Chief Minister said the State Government is contemplating to promulgate an Ordinance at the earliest to curb the unlawful activities of the MFIs and has convened a Special Cabinet Meeting tomorrow at 12.00 noon to consider and finalise the  Ordinance. The Ordinance is aimed at to curb the questionable methods of the MFIs to lend money and extract heavy interest  from the borrowers and save the poor from their clutches. He said the opinions of legal experts and Advocate General are also being taken before drafting the Ordinance.

The Chief Minister will also hold a brief meeting with all the bankers today in the evening at Camp Office and requested them to provide more micro credit to the SHG members and on simple terms. He told the bankers that it is not only the target and total quantity of the loan that counts but wide penetration into all the rural areas and lending to the rural poor in times of actual need. He also told the bankers to create awareness among the people that bank loans are simplified and interest is very low and should be able to wean away the poor, farmers and SHG members from the clutches of the MFIs. The Chief Minister will also hold a video conference tomorrow with ministers, Chief Secretary, all District Collectors, Superintendents and other officials at Secretariat. He will ask the Collectors and SPs to initiate firm action against the Non-Banking Finance Companies (NBFCs) and MFIs and ensure more credit flow in the rural areas.

The Chief Minister said when he met the Prime Minister Dr Manmohan Singh yesterday in Delhi, he raised the issue and explained to him the increasing menace of MFIs in rural areas in the State. However he said a blanket ban on the MFIs may not be in the interest of the rural poor but the Government will act and act firmly to prevent the MFIs from fleecing and harassing the rural poor and charging exorbitant interest from them. He said the Government is fully seized of the matter and stern action will be initiated against the erring MFI agents who violate the law. The Chief Minister thanked the Prime Minister for the latter's concern on the issue.

Earlier in a letter to the Prime Minister, the Chief Minister urged for an urgent need to regulate the activities of the private Micro Finance Institutions who unleashed a new and more insensitive money lending system in the garb of lending to the poor. The Chief Minister requested the Government of India that the role of private MFIs promoted ostensibly for achieving financial inclusion may be looked at. The unregulated MFI activity has resulted in multiple financing to the same rural poor household often done without due diligence. Since the rural poor lacked money to service these loans, repayment of the older loans is being done by giving fresh loan resulting in an ever-rising spiral of debt. The Chief Minister pointed out that MFIs are also charging usurious interest rates, resulting in hyper-profits to MFIs while the poor are driven to suicides under the debt burden often recovered using brutal methods.