Micro Business Loans in Andhra Pradesh
State government authorities in the Indian state of Andhra Pradesh are skeptical that new MFI legislation from the federal government can help the institutions that issued micro business loans to recover losses of over Rs 7,200-crore. The state authorities believe that the micro finance institutions (MFIs )must negotiate directly with borrowers to recover any of their capital.
The state rural development authority has been charged by some as working against MFIs interests, but in reality they have offered to help facilitate negotiations to recover money for the MFIs. However, MFIs have tended to reject negotiations because it would mean that they would have to be flexible regarding interest rates on these loans. According to the state authorities, the MFIs hadn't carried out due diligence in verifying that rural borrowers had the capacity to repay all the debt before offering them multiple loans.