‘Accredited loan providers’ mooted

‘Accredited loan providers’ mooted
Our Bureau
Mumbai, July 24 A technical group set up by the Reserve Bank of India has suggested the creation of a new class of moneylenders called “Accredited Loan Providers”.
Unlike the traditional moneylenders, these new breed of lenders will provide loans to villagers with money borrowed from commercial banks.

The proposed lenders are expected to bring discipline in the informal credit delivery system, which is now being dominated by village moneylenders, who charge exorbitant interest rates.
An accredited loan provider (ALP) will be linked to a particular bank, which will monitor his lending activities. But the lender will do the business independent of the bank (at his own risk) competing with the existing moneylenders.

For the bank, the advantage would be that the money provided to ALPs will be treated as priority sector lending. “This would encourage the banks to take up the role of institutional creditors and disburse loans through the linkages with accredited loan providers as an additional business,” the report said

Existing moneylenders, agricultural traders, commission agents, vehicles dealers, retail petrol dealers or any other persons considered suitable by the bank can become an ALP. The group has also suggested a set of conditions to be entered into between the bank and its accredited loan provider.Interest Rates

The technical panel has also recommended compulsory registration of moneylenders in all States and capping of the interest rates charged by them.
It has suggested that state governments should notify from time to time the maximum interest moneylenders could charge.

This could be done in consultation with the state-level Bankers’ Committee. Such rates can be linked to a market-determined benchmark rate and provide mark up for cost of delivery, other expenses and a reasonable margin, the committee said in its report.
The Group, constituted by the RBI in May 2006 under the chairmanship of Mr S.C.Gupta, the then legal advisor-in-charge of RBI, proposed a model legislation on moneylenders to be adopted by the States.