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The Union Minister for Finance and Corporate Affairs, Shri Arun Jaitley, the Minister of State for Finance and Corporate Affairs, Shri Arjun Ram Meghwal, the Minister of State for Finance, Shri Santosh Kumar Gangwar along with the senior officials presented the General Budget to the President, Shri Pranab Mukherjee, at Rashtrapati Bhavan, in New Delhi on February 01, 2017.(PIB Photo)

Microfinance Industry Upset with NO Waiver of Service Charges in Budget

The Budget 2017 has received a mixed reaction from the microfinance industry that was worst-hit due to demonetisation.

Though the budget was mainly rural-centric with several schemes and infrastructure for the villages, it has failed to address the long-standing demand to waive off the service charges for the MFIs as they serve the bottom of the pyramid and poor borrowers, said major industry players.

The move to encourage SIDBI to refinance credit institutions which provide unsecured loans at reasonable interest rates to borrowers based on their transaction history is one step cited by MFIs on the road to support the sector while the renewed thrust on rural areas, infrastructure and poverty alleviation too received positive reactions.

The increase in budget provision for Fasal Bima Yojna is a welcome move, said Mr. Kuldip Maity, MD & CEO of Village Financial Services based in Kolkata. “Though this year’s budget does not have any surprises, we welcome FM’s approach to spend more in rural areas, infrastructure and poverty alleviation. The increase in budget provision for Fasal Bima Yojna is a welcome move,” he said in a statement.

Mr.Kuldip Maity, MD & CEO, Village Financial Services Pvt. Ltd. on the Union Budget 2017. (Photo: VFS)

With the renewed thrust on rural economy, irrigation, women empowerment, rural infrastructure, 100% village electrification and skill development, he said this year’s budget would be quite impactful on rural India.

On the demonetization–hit microfinance sector, he said the move to reduce the corporate tax rate from 30% to 25% for those with an annual turnover of less than Rs. 50 crore would come as a graceful gesture.

However, he said, there were some disappointments as the long-standing demand by Microfinance Institutions to exempt them from the service tax and ease the burden of the microfinance borrowers was not addressed in the budget.

“However it is a good news for microfinance industry that Government will encourage SIDBI to refinance credit institutions which provide unsecured loans at reasonable interest rates,” he noted.

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