After a crackdown on loan sharks for their illegal activities, the State government has decided to regulate functioning of non-banking financial companies and chit funds in view of complaints about exorbitant interest rates they charge from borrowers.
The government would ensure the strict following of the ‘fair practice code’ instructed by RBI for the operation of NBFCs, Home Minister Ramesh Chennithala told reporters here Tuesday.
‘In view of wide complaints about excessive interest rates and other illegal practices by some NBFCs, chit funds and other micro financing institutions, the state government has decided to regulate their operations,’ Chennithala said.
Stating that the government would strictly monitor whether the operations of such private financial institution were adhered to the state and centre rules, he said branded NBFCs would also not be exempted from this.
‘We have decided to make the fair practice code directed by the apex bank mandatory for operations of all NBFCs in the state. We want all of them to publish their interest rate in their websites and newspapers to ensure transparency,’ he said.
As the state government had some limitations in interfering into the operations of NBFCs directly, the government has plans to approach the Reserve Bank governor seeking more control over their functioning, he said.
The minister also warned stern action against illegal practices like collecting blank cheques and promissory notes from the borrowers by private financial institutions.
Under the ‘Operation Kuber’ launched by the state government recently to curb the loan sharks, a total of 786 cases had been registered during the period May 11 to 19.
As many as 466 arrests were registered and Rs 3.63 crore had also been seized from them, he said.
The mission was launched earlier this month following the suicide of a five-member family due to indebtedness and threat from money lenders.