The Telangana Micro Finance Institutions (Regulation of Money Lending) Act, 2011

(1) This Act may be called the Telangana Micro Finance Institutions (Regulation of Money Lending) Act, 2011.

(2) It extends to the whole of the State of Telangana.

(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.

(1) All Micro Finance Institutions operating in the State of Telangana as on the date of the commencement of this Act, shall within thirty days from the date of commencement of this Act, apply for registration before the Registering Authority of the district specifying therein the villages or towns in which they have been operating or propose to operate, the rate of interest being charged or proposed to be charged, system of conducting due diligence and system of effecting recovery and list of persons authorized for conducting the activity of lending or recovery of money which has been lent.

(2) No MFIs, operating at the commencement 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 Authority shall conduct verification 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 written undertaking from the MFI that it shall always act in conformity with the provisions of this Act.

(4) Where the MFI applies for renewal of registration, an application 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 registration, after due verification of the performance of the MFls in the field level and after hearing objections, if any, from the general public regarding extension of Registration.

(1) Every registering authority shall maintain for the area under its jurisdiction registers 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.

(1) The Registering Authority may, at any time, either suo motu or upon receipt of complaints by SHGs or its members or by members of the public cancel the registration of an MFI after assigning sufficient reasons for such cancellation:

Provided that no order of cancellation of the registration shall be passed without issuing notice to the MFI intimating the facts 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 enquiry under sub-section (1), the Registering Authority may, for sufficient reasons to be recorded, suspend the registration, of an MFI.

No member of an SHG shall be a member of more than one SHG, provided that where a member has, at the commencement of this Act, become a member of more than 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.

No MFI shall seek any security 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.

(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.

(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 after 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.

(1) No MFI shall extend a further loan to a SHG 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 prescribed 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 shall secure the following information 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 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 would 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.

(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 every paper signed by the borrower with words indicating such repayment and provide copies thereof to the borrower. (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 licence of such an MFI as provided in section 5.

Every MFI shall submit 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.

(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 of lending and call upon him to produce any record or document relating to such business and every such MFI shall allow such inspection 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 such period as may be necessary for the purposes of examination, 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.

Any SHG or its members or any member of the public can file a complaint 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.

(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 (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 or 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 prosecuted 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 to the proceedings before a Fast-Track Court, and for the purpose of the said provisions, a Fast-Track Court shall be deemed to be a Magistrate.

All persons who are connected with and responsible for the day-to-day control, business and management 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.

Any person who contravenes 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 Rs. 10,000 or with both.

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.

If any difficulty arises in giving effect 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.

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.

The Government shall prepare an annual report on the administration of this Act and the same shall be placed before the State Legislature.

The Andhra Pradesh Micro Finance Institutions (Regulation of Money Lending) Ordinance, 2010 is hereby repealed.