COVID -19 Pandemic in India and impact of Microfinance Companies and Non Financial

Banking Companies microcredit loans to Poor's households through the Self Help
Groups( SHG) in West Bengal state and also in India
Authors are:
*Professor Dr Pranab Kumar Bhattacharya MD (University of Calcutta), FIC Path , WBMES
( retired) Ex Retired Professor and Head of Pathology Department, Calcutta School of Tropical
Medicine, 108,Chitta Ranjan Avenue, Kolkata -700073, West Bengal, india, Department of
Health and Family Welfare (WBMES wing) Government of West Bengal, Equivalent officiating
Rank he retired -: "Special Secretary " to the Government of West Bengal
**Ex- Principal of JMN Medical College, JMN Educational and Research Foundation, uttar
panchpota, Chakdaha, District- Ranaghat ,West Bengal ,India
***At present - (since 6.02.2023): Posted -:
Professor and Head of Pathology Department ( every year renewal contractual post but full
time),JIS School of Medical Sciences and Research ( Under JIS University , Nilgange,
Agarpara, 24 parganas North ) jagancha ,santragachi, Howrah District, West Bengal
Residence -:
Mahamaya Apartment, Block -B, flat -3, 2nd floor ,Mahamayatala, 54 NSC Bose Road, Post
office- Garia , Kolkata 700084, West Bengal ,india
Email profpkb@yahoo.co.in( mostly used)
prof.pranab@Gmail.com
whatsapp & mobile -: 9231510435

2) Rupsa Bhattacharya-; BA honours student in journalism and Mass communication (4th

semester student ) APC college ,sodepur road, MadhyamGram north 24 parganas West
Bengal India under West Bengal State University, Barasat ,North- 24 parganas, West
Bengal ,India

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Abstract
Ministry of H&FW,Govt. of India, brought a temporary but effective solution to tackle covid- 19
pandemic in India, before could coverage 2 doses covishelid or covaccine, strictly ordering to
follow mandatory COVID -19 protocols and pan India or partial lock down from 2020 February
to 2022 December specially in all containment zones.Obviously Microfinance sectors should get
hit by pandemic and should face a big financial crisis. But it was different for MIFs or NBFCs .
Microloan disbursement jumped about 20% in December 2022 quarter to Rs 77,877 crore, over
Rs 65,392 crore in December 2021, backed by 14% rise in numbers of new women borrowers .
The industry grew almost 19% compared to 14% rise in number of borrowers. In terms of
regional distribution of gross loans, east & northeast and south accounting for 63% of the total
portfolios. Bihar is the largest state in terms of portfolio outstanding followed by Tamil Nadu and
West Bengal with high amount of loans in nine districts of West Bengal , where microfinance
companies operated through field officers , targeting illiterate ,semiliterate, poor married men/
women of locality in name of services, social or families welfare , women empowerment, poverty
upliftment, education, health care, employment generation by microloan through a group of
married women. According to a report “it was observed that average outstanding per unique
borrower is highest in West Bengal and in Assam, for past three years (2019-2023). 40-50
percent of microfinanc loan portfolio in both Assam and West Bengal are from one or two
institutions. According to SIDBI and Equifax’s Microfinance Pulse, Vol VII, November 2020
report on microfinance showed that during Covid- 19 pick lockdown times, when many people
in India were dying ,in the Q2 of the FY 2020-21, 300% more micro loans were disbursed in
india of —worth Rs 323.75bn—vis-à-vis Q1 of the same FY in terms of volume and 393% more
in terms of value. Around 70% of these loans are in buckets of Rs 30,000 to Rs 50,000. Small
and micro loans distribution by MIFs and NBFC-MIF/LC with unusually high interest to large
segments of the Indian population in unorganised sectors with poor livelihood domains are with
ulterior motives for company's commercial interests ,profits but nothing else. These legal / illegal
money lending companies ( against PMLA laws ,section 4) played a key role between
nationalised or commercial lending banks taking mild to moderate risk for their better returns
through EMIs. This sector now plays a strong position, when it comes to return on their
investment in monetary terms by loan collectors efficiency.
MIFs works on a crude principle of,' contact with clients to generate false trust on them
regarding social ,economic upliftment of poors when accepting their loans hiding I'll effects of
loans
, overworks, various illness, indebtedness , absconding, suicide, on the family in near future .In
2020,lockdowns for spread of COVID-19 virus brought almost every business to a halt,(except
essential services).Worst affected were small enterprises with little or no reserves and high
liquidity turnover operations, which was the case for typical micro and small businesses.
Microfinance companies shifted their motivation to neoliberal models dominated by capitalistic
commercial private banks. All MIFs/ NBF -MIFs motivated today expanding their profitable
business through legal / illegal money lending during covid period, targeting new illiterate/ semi
literates married women borrowers who required liquid cash money to sustain their life ,for
medical expenditures ,to run their micro enterprises during pandemic. To operate a smooth
financial profitable business in the post COVID period, MFIs have to rely on trained loan officers
/Recovery Agents and have to put poor loan borrowers at very high level pressures, threats,
nuisance to ensure their traditionally high repayment rates. Loan officer's these acts to be
considered as a criminal offence done in the eyes of Indian laws and human rights and
necessary action to be taken by local administration or police station under PMLAct.
Government now trying to smooth out its operations through rescheduling of loans. RBI a
regulator of financial sector announced various steps to limit macro effect of pandemic on
overall financial system of country, including increase of moratorium period for loans for next 6
months, rebate of interest rate, special package etc; To help MFIs ,to address their liquidity
issues, the government of India offered near zero interest loans through its financial arms — the
Small Industries Development Bank of India, the National Bank for Agriculture and Rural
Development, and the Reserve Bank of India’s Targeted Long-Term Repo Operations . At the
regulatory level, they should be directed to be most conscious of their borrowers' well being.
They should be ordered to adhere to industry's code of conduct requiring fair interactions,
suitability, loan transparency, interest rate and addressing customer grievances officially. MFI/
NBFCs customers must be offered the opportunity to take advantage of the moratorium on their
loan repayments with lowest EMI based on the monthly income of the family. And wherever
necessary, MFIs worked to create awareness about the implications of the moratorium on
interest/repayments, so that customers could make informed decisions.

Key words
Microfinance institutions, Non Banking Financial companies , Microcredit, High interest rate ,
COVID 19 lock down, Dilemmas , Indebtedness, absconding, sucide case
studies,Restructuring the existing loan, commercial business and profits making industry and a
slippery slope ,

Introduction
Microfinance is a category of financial services targeting individual men or women or a group of
married women and small business people (Microfinance company CEO's own profit is their
basic motivation) who lack access to conventional banking systems or post offices and related
services. Microfinance includes microcredits, provision of small loans to poor clients (through
Self Help Groups of women / men or SHG or a group of people); savings and checking
accounts; microinsurance; and payment systems, among other services. Microfinance services
were designed to reach excluded customers, usually poorer population segments of Indian
society, mostly targeting socially marginalised, unemployed, or geographically more isolated,
and in convincing a false belief of helping them to become self-sufficient in their crisis times.
Proponents of microfinance company owners often claim that such access helps poor people
out of poverty, including participants in the Microcredit Summit Campaign. For many bankers ,
microfinance is a way to promote economic development, creating employments and growth
through the support of micro-entrepreneurs and small businesses; for some others, it is a way
for the poor to manage their finances more effectively and take advantage of economic
opportunities while managing the risks of taking loans. Many critics of microfinance companies
and NBFC -LC/ MFIs often point towards many of the ills of micro-credits that can create
indebtedness of borrowers of loan once taken and to face consequences of such
indebtedness . Many studies have tried to assess its impacts on microcredits.
MIFs / NBFCs MIF why at a very high interest rate ??
One of many principal challenges of MIFCs and NBF-Lc/MIFs companies is for providing
small loans at an affordable cost or at Indian Nationalised Bank's interest rate as per Reserve
Bank of India's guidelines 2022 for interest to be charged on a yearly basis never more than
15% . But the Indian average interest rate of micro loans and interest rate is estimated at 37%,
with rates as high as 50% to 120% interest in many markets, that the laws of the country do
not permit at all for money laundering. The reasons for such high interest rates by MFIS or
NBFIs was never clarified to borrowers of loans or ever justified to their clients in their official
documents or to regulatory authorities like RBI or Ministry of commerce , government of India,
except that their own profit form their money lending business in the Indian market. Indeed, the
local microfinance organisations or non financial banking organisations that receive zero-
interest loan capitalsl from the online microlending platform or from the National Banking system
also charge average interest and fee rates of 35.21%. Why such a high interest rate if their aim
is really to alleviate poverty of Poor's ?? It remained a big unanswered question for all citizens
of India. Rather, the main reasons for the high cost of microfinance loans is the high transaction
cost of traditional microfinance operations relative to loan size and their high profit earning
strategy as other businesses operating in the open market of India.
Microfinance and covid 19 pandemic lock down-:
With over 180 million borrowers worldwide , the microfinance loan sector provides access to
financial services to low-income poor households who are not served by traditional banks but
they are with very high interest rates, at least in Indian states. The Covid-19 pandemic has
created substantial new challenges for work environments in general and for the microfinance
sector too . Beyond the immediate health and economic consequences, the pandemic has
totally reversed recent trends of lowering poverty rates and has exacerbated pre-existing
inequalities, leading to severe challenges for microfinance companies in India for running their
huge profitable business. Collapsing household incomes during the pandemic and in post
pandemics periods, especially in the low-income population as documented , have drastically
reduced the repayment capacity of a typical microcredit borrower, threatening the collapse of
the entire microfinance sector ( Reference 1 ).
To operate smooth financial business and so called services towards the poor households ,
microfinance institutions (MFIs) had to rely on frequent personal interactions of their officers
and Recovery Agents ( to West Bengal loan borrowers or clients they are rather termed as "jam
doot" or sent angels from God of Death to take life, in villages,in sub urbans and sir in slums
areas of towns or city ) had to put illiterate, semi literate loan borrowers at very high level
(both social and economic) pressures to ensure traditionally high repayment rates. These
tasks were / are now carried out by MFIs’ NBFC- MFIs key personnel: loan officers. Loan
officers or (God's sent Jam doots ) use to travel to a locality in suburban or urban or slums
areas of cities or in villages/ remote villages locations to interact with their existing borrowers
and further target to acquire more potential new economically poor borrowers to complete
targeted quota
,( making them convinced, lured to take easy loan without any collaterals, bonds, creating a
false sense of borrower's belief that their company's loan will be rather much helpful for the
families to up lift from their poverty state and they are friends to them, not the hungry wolves to
kill them by indebtedness ), assess to borrowers’ credit worthiness, ( they call it cibil score ) ,
disburse loans, provide often wrong advices in their financial matters, as they are trained to
speak by company before client's, and collect loan repayments weekly or monthly as jamdoott
( sent angels of God death, -all common Indian people call them in this language). Hence, loan
officers link the lenders to its borrowers and try first to establish trusted(???) relationship which
is very useful to accept loans by those illiterate or semi literate poor people. Despite their crucial
role in the functioning of an MFI, little is known about how loan officers or jamdoots organise
their works, their fixed office address , their police verified identity as loan officer or as recovery
agents of a company and juggle these different tasks in general.

Loan officers must now be facing new challenges for covid 19 lock down and COVID
protocol
With the covid 19 pandemic, loan officers of MFI and NBFC -MFI ( jamdoots) may be now
facing new challenges: In addition to the natural reductions in loan borrowers’ repayment ( EMI)
capacity. Lockdowns COVID virus of various VOC/ subtype strains like alpha, beta ,delta,
omicron and it's all subtypes strains etc spreaded through out India and government of India's
official restrictions order to social gatherings and to strictly follow COVID 19 protocol by
Ministry of Health and Family Welfare of Govt of from 2020 early March to 2022 December ,
posed some limitations on the usual operations of collection and distributions of loan and
additional adverse effects towards loan borrowers in terms of being infected by the virus, health
care out of pocket expenditure and death of family members from the virus during the pandemic
: If pre-pandemic works incentives are still in place that tie up loan officers’ earnings to
borrowers’ repayment of EMI, and if the loan officers or recovery agents ( jamdoots) of MFIs
when may be putting much pressure already to economically vulnerable loan borrowers to
repay their loan EMIs or in one time settlement, that must be considered as a criminal offence
done by RA in the eyes of Indian laws and human rights . This will then be a risk factor for
destroying the hard-to-built, trusting relation with the lender and borrower and compelling law
conscious loan borrowers to file FIR against the loan officers or jamdoots RA in their local police
station, if any untowards situation arises for their pressure including deterioration of physical
and mental health of borrowers for their pressure or making nuisance before or in residential
premises of borrowers as per law .

COVID 19 and microfinance loans -was it really helpful at all for Poor's or villagers. Was
it a blessing or a big curse for them ??( Reference no 26)
Covid‐19 pandemic in India ( it lasted from January 2020 to December 2022 ) in the pandemic
state and till now is being continued in India in endemic phase in 2023 end of March onwards ,
had caused unceasing damages to the Indian economy, the economist says it often. In an
attempt to rescue or revive the Indian economy from the slump, the nationalised and other
private banking sectors seem to have received special attention I presume. Ironically, there was
hardly any discussions over the worst and most devastating role of and the challenges to the
microfinance institutions (MFIs) and NBFC- LC / MFIs companies in India and in the state of
West Bengal, which is now focused towards the most vulnerable poor loan borrower sections of
the society. In India, the MFIs have played in fact the worst role in achieving the much talked
about primary objective of financial inclusion by giving microcredit loans to vulnerable
populations but that was with their high interest rate for the loan . They however worked during
this period as the supplementary institutions to nationalised or privileged banks for the outreach
to the financially excluded sections of the Indian society with the ulterior aim of their business
and nothing but to exploit poor borrowers financially and that was just for their company's own
profits . As per the Sa‐dhan (2019) report,( Sa‐dhan 2019). The Bharat microfinance report (p.
2019) the only MFIs had an outreach to 50 million Indian borrowers with an outstanding loan
portfolio of USD 12.76 billions. Just one may rethink , in reality, how much money these MFIs
earned through their business strategy as their profit at the cost of poor people's families since
the 2012 microfinance company bill passed in the Indian parliament.In 2019 , there had been a
22% increase in client outreach and a 34% increase in loan disbursements over the previous
year 2018, indicating a very high growth rate of microfinance companies based on Indian
illiterate, semi literate, needy and poor marginalised sections of Indian population at rural
Village, suburban urban, city slums

Revaluation and Re-arrangement of Indian MFIs NBFC-LC/MFI is so needed?

In this author's opinion the MFI operations in Indian all states and in the perspectives of
financial services towards the poor need now extensive re-evaluation and re-arrangement by
the government of India / state government, and court of laws in the wake of the pandemic
related lockdown measures which was in force across the country from 2020 March to 2022
December . To prevent the spread of Covid‐19 virus, the government of India administration
mandated social distancing , ordered complete lock down and closed and restricted all kinds of
market activities .As majority of the MFIs' / NBFCs -MIFs financial services were directed
towards low‐income households whose earnings were either stopped or were much irregular
and to a larger extent,on daily basis to sustain their life. The lock down restrictions on the
economic activities had visibly & adversely affected the earnings and the hard cash‐flows to
these households. The poor families seemed to be more severely affected than the rich , upper,
upper middle income and middle income households or those who are in the government or
semi government or in corporation sectors or in big manufacturing companies and in essential
services sectors as employees with fixed monthly salaried income . A significant numbers of
MFIs' NBFCs loan borrowers are still unemployed in 2023 April or employed now in low income‐
generating jobs such as street and train hawkers, labour, maid servants in houses, cooks,
drivers, ayas , auto rickshaw, rickshaw and van pullers, startup small business holders ( may
faced loss in business in lock down ) , small shopkeepers, vegetable and fish vendors, daily
labourers, porters, artisans and others informal sector activities. In times of COVID- 19
pandemic, full or partial lockdown crisis, when the sources of income were much restricted, the
poor households were most vulnerable to approach unscrupulous money lenders for their
financial needs. To tackle that crisis, these households were likely to adopt unfavourable
survival mechanisms such as liquidation of assets, a decline in food consumption, and abortion
of healthcare services . Amid the crisis, the unavailability of adequate financial services
exacerbated their economic hardships. The inaccessibility of financial services to the poor and
informal sector workers may lead these households into a poverty trap from unscrupulous
moneylenders or MIFs or NBFCs . In such situations, these authors think that the registered
MFIs might play a great hope to these people for the financial support to maintain, start and
explore available economic opportunities keeping aside their huge profits though interest they
charged just for their profits. It was to be regulated by the Indian government not with such a
high percentage of interest rate for microcredits loan from ( 26% to 35%) with processing
charges and with ulterior motivation of huge profits from poorer households . This is in human
and human rights commission must look after the issue these authors consider it so.
What these author considers that the current post COVID -19 unfavourable circumstances, ( till
date covid- 19 is not over in india and daily new infection with new omicron VOC in India
67,806 active cases as on 22 nd April 2022) the central government of India / State government/
court of laws/ RBI / SEBI must enforce the MFIs NBFCs to re-think about whether to continue
or temporarily suspend their recovery operations or waive the interest .
We do understand that there are some compelling factors for this big dilemma.
1), the administrative instructions on pandemic already hampered some operations of the
MFIs.and NBFCs companies for recovery of loan 2) as the borrowers of microcredit loans are
themselves struggling still to make their livelihoods, making periodic EMI repayments for them
was and is now difficult and consequently, the loan portfolios seem to have been deteriorating
their living standard pushing from poor to further poor state. 3) in response to their deteriorating
portfolios, the MFIs NBFcs must stop or restrict their financing activities by order from the
ministry of commerce or home ministry of the government of India or RBI . The RAs ( jamdoots)
overt behaviour to recover due EMIs creates a wrong impression among the loan borrowers
and also to the whole population of India that MFIs NBFCs seem to be running away when they
are most needed and that MFIs are purely driven by their commercial objectives and interest for
their own profits compromising the social objectives they once promised and the bill for
microfinance was passed in 2012 on their promises.

COVID 19 is not over yet in India in 2023 in end of April and dilemmas
As the virus did spread( total 4,48,91,985 active cases and resulting death 5,31,330 since 2020
in India ) and the omicron subvariant is still spreading in India like XBB1.16 .1 VOC subtype
( throughout India and the death toll was on the rise up to 2022 ) ,( on 22.04.2023 the 7 days
average, as per day new cases 12,193 cases and per day 29 to 42 deaths in COVID 19 when
in West Bengal state till date total active cases number is 1,127 and death 2, average new
cases 53 daily as on 22.04.23 ) and there was then no certainty about how long the covid crisis
would prevail and how much time the Indian economy would take to revive from the slump Till
today some countries are seeing increases in number of Covid 19 XBB. 1.16.1, and over the
past four weeks, 14,000 people lost their lives to this disease throughout world,” And, as the
emergence of the new XBB.1.16
1 variant illustrates, the virus is still changing, and is still capable of causing new waves of
disease and next many deaths. According this authors , one in approximately 10 infections of
XBB 1.16 must result in Long Covid Syndrome if this strain continues to flourish in india,
specially in poor people who have less immunity due less nutrition for their indebtedness and
overworks to repay their due EMIs to MIFs.However ”With negative growth rate persisting over
the last two and half years and the fear of a slow growth rate continuing in the post‐pandemic
period in the short‐ and medium‐run, the MFIs arguably would have to face the most difficult
time in terms of credit loss and poor liquidity. This is inevitable for them too. On the other side,
the economic slowdown has direct adverse effects on productive economic activities, thanks to
both demand‐ and supply‐side constraints. Consequently, not only does it refrain the MFIs
borrowers clients from venturing into enterprises due to lock down, death of near ones, but it
also created the problems of indebtedness to borrowers . Hence, the dilemmas are
multipronged, needing further scrutiny from both MFIs' and clients' perspectives. There must be
different dilemmas and real challenges that the MFIs borrowers' clients may face during the
pandemic and the post‐Covid period . I must analyse it from the perspectives of the two key
stakeholders in MFI lending namely the MFIs and the clients. In this respect, I also examine the
government initiated schemes to revive the economy and their possible impacts on the MFIs
and their clients.

FROM THE MFIS' PERSPECTIVES-:

The resilience of registered MFIs to the pandemic and now on-going endemic depends largely
on the extent of cash inflows to MFIs companies, their operational sustainability, and their
governance. The cash inflows to MFIs comprise primarily by loan repayments by the borrower
clients followed by the borrowings from financial institutions like nationalised banks and
investors. However, the loan repayment capacity of the borrower clients must have fallen to
zero during the pandemic period and in post pandemic but in the endemic period now too .
The borrower clients are now struggling enough to engage themselves in economic activities
and make earnings of their best even with overworking both day and night for the repayments
under conditions of restricted market activities. This overworking will result them in various
disease states like infections, malnutrition, hunger, cardiovascular hypertension, heart attack
or Acute myocardial infarction, brain stroke,T2DM , depression, Tuberculosis, further and will
increase their out of pocket health care expenditures ( as they won't find real time to attain free
govt health care systems due to overtime works) and will plunge them to further loans and
indebtedness in private for visiting private health care hospitals .There is still pressure on
financial institutions banks and social investors NGOs to fund the operations of MFIs. From the
perspective of operational sustainability, several factors may now affect the normal operations
of the registered MFIs. The MFIs' financing mechanism involves group gatherings/meetings
among their clients and their regular interactions with the loan officers, which for long two and
half years stopped, thanks to the imposition of restrictions.
Looking at the upsurge now in the endemic spread, if MFIs companies plan to halt their
recovery operations partially , it may impact the MFIs' cash generation process and target huge
profits . This may lead to some financial burden on them in terms of payment towards fixed
expenses such as their employees' salaries, commission of recovery agents and office
rent ,electricity bills. In such a scenario, the MFIs companies are left with two sweeping
measures either (a) to reduce its current and fixed expenses, which may include reducing
salaries or laying off employees. 2) to reduce their strategy of earnings of their huge percentage
targeted profits from the Poor's loan borrowers and give them time to repay in easy EMIs rather
harassing them for repayment by (jamdoots ) recovery agents, if necessary waving accumulated
interest In case,or in the SB interest rate of nationalised banks in India. If the MFIs companies
consider laying off some of their employees, it can spoil the employees' loyalty towards the
organisation. Such steps can have other repercussions as well. First, the MFIs companies will
lose contact and information about the borrower clients and consequently, the MFI‐client
relationship may break. Second, after the covid -19 crisis will be over, the MFIs companies will
have to incur the costs of recruiting and training new employees. However, the problems of
tracing back and building a relationship with the borrower clients may turn out to be a tough task
All these may result in poor repayments from the clients and rising non‐performing assets.
Third, in the case of retaining the employees on payroll without paying them salaries, the feeling
of demotivation and detachment is bound to crop up leading to rising inefficiencies in delivering
microfinance services .

The borrower clients of MFI must not go into indebtedness

The MFIs are expected now to face the problems of low repayments for some other pressing
reasons as well. Amidst minimal market activities and the restrictions on movement, the clients
keep struggling to make earnings and repay their debts. In such situations, they may search for
credible sources to borrow bigger loan amounts and clear their older debts. These borrowings
can have cascading effects and can drag the clients into indebtedness.

Restructuring the existing loan contracts by MIFs and NBFC MIFs is the way out ?
One way‐out for the MFIs companies in such a situation could be to consider restructuring the
existing loan contracts instead of closing off the operations what this author thinks . They may
provide an interest rate subsidy as told earlier or they can extend the loan moratorium for next
two or three years . These measures will provide flexibility in repayments of principal loans at
least and improve loan portfolios in India. One may, however, argue that such measures on the
part of the MFIs may send a wrong signal to the clients about the possibilities of future loan
waiver, disturbing their credit discipline (reference no 2 ). To make the condition worse, loan
non‐repayment can have a contagion effect leading to mass loan default.
The problem of poor repayment behaviour may invite the phenomenon of moral hazard
(reference no 2 ). On the one side, mass loan delinquency may pose a serious threat to MFIs'
financial solvency (reference no 2 ). On the other side, the loan officers may exert coercive
measures towards ensuring better repayments which are criminal offences as per IPC
( reference no 2). Consequently, many genuinely vulnerable clients would be into dual
problems of poverty and debt trap. Besides, the possibilities of a mission drift( if at all it exists in
any MIFs) on the part of the MFIs cannot be ruled out whereby the MFIs should shift their client
base from the low‐income households to the relatively wealthier upper middle class conscious
families as their business targets .
Given such complex challenges, the sustainability of operations and continuity of microfinance
services largely depend upon the skill set of its management and the experiences of its
employees. The MFIs having a good governance structure and employees with technical skills
in banking and finance may perform better compared to their counterparts lacking the same.
These organisations may overcome the crisis by adopting vigilant and robust lending and risk
management practices.
FROM THE BORROWER CLIENTS' PERSPECTIVES-:
Needless to say, due to the slowdown of the economic activities, earnings and cash‐flows
across the country have been adversely impacted. In adverse economic situations, the
borrowers' resilience to the challenging pandemic depends on the types of economic activities
they are engaged in, rescheduling of principal payments, subsidisation of interest rates, and
extension of moratorium period (Reference 3 ). The impact of the COVID 19 pandemic does
not seem to be uniform across different sectors, regions and household types. The households
which are engaged in big business activities related to essential commodities like big groceries,
medicines, medical shops , nursing homes private health care workers , home cooked food
suppliers, big restaurant, wholesale market of fish ,fruits and vegetables, milk and milk products
houses , newspapers houses, four or two wheeler car business, electronic products, etc. are
reported to be less affected. However, a large pool of activities in the informal sector including
start up small business , eateries, tourism, saloons, rickshaw pulling, auto drivers , daily wage
labour and even contractual labour in the formal sector is severely hit. The MFI clients from the
latter categories, in the absence of income generation, are expected to utilise loans primarily for
household consumption purposes or medical purposes. They are prone to multiple borrowings,
poor repayment behaviour and concomitant over‐indebtedness ( reference no 4). The risk of
migration of the clients from the urban to rural areas seems to be making the problem of default
far worse.
The clients who have fewer instalments left are more likely to clear their debts compared to
those who have most or all of their instalments left . Particularly, those who have recently
availed of credit are expected to be greater defaulters as their loan utilisation may not provide
them expected earnings. This would create a double challenge, both to the clients in terms of
their ability to repay and to the MFIs to issue fresh loans.
Interestingly, the agricultural sector seems to remain less affected by pandemic (references no
3 ). This is perhaps good news for both the MFIs in particular as well as the economy at large.
In India, about 46.1% of the households have their livelihood dependence on agricultural and
allied activities (reference no 5 ). A better harvest from this sector may help the economy
recover the losses elsewhere and revive faster. From the perspective of the MFIs, apparently,
the demand and repayments of microfinance credit are robust in this sector. This may help the
MFIs sustain their operation at least in the rural economy in the medium and long‐run, if not in
the short‐run.

THE WAYS FORWARD -: Atmanirbhar Bharat/Pradhan Mantri Garib Kalyan

Yojana”/Pradhan Mantri Street Vendor's AtmaNirbhar Nidhi (PM SVANidhi/ Deen Dayal
National Livelihood Mission scheme/ Pradhan Mantri Jan‐Dhan Yojana
Considering the MFIs as instrumental in providing financial services to the poor families, and
that the MFIs are currently finding it difficult to raise capital from the debt market, the
government of India has introduced certain useful measures to improve their liquidity needs. A
special liquidity scheme of USD 4.06 billion has been launched for the registered NBFC
companies, housing finance companies, and the MFIs (reference 6). This is expected to ease
the MFIs operation and in turn, help the needy avail of much‐needed credit to let go of the
business. If the clients can resume their economic activities, the demand for and repayments of
the MFI loans are likely to improve.
Under the recently launched scheme of the Indian government “Atmanirbhar Bharat” or “Self‐
Reliant India”, a financial package of USD 270.42 billion was announced to revive the economy
(reference no 7 ). The economic package has the provision of financial assistance to the small‐
scale industries namely home industries, cottage industries, small‐scale industries, and MSMEs
that are sources of livelihood and earning for a majority of poor and low‐income households.
Under this scheme, there is a provision for collateral‐free loans to these industries to meet their
operational liabilities, to buy raw materials and to restart the production processes. Besides,
under the scheme of “Pradhan Mantri Garib Kalyan Yojana” a special package of USD 23.66
billion was also announced for the poor, which would provide some relief from the pandemic.
Further, to provide financial aid specifically to the street vendors to resume their livelihood,
Pradhan Mantri Street Vendor's AtmaNirbhar Nidhi ( PM SVANidhi) scheme was launched.
Under the scheme, economically weaker people engaged in vending of articles, goods, and
food items of daily use on a street, footpath, or pavements, etc. are facilitated with a loan
amount of USD 135.21, which is repayable in one year (Reference no 7 ) . Under the Deen
Dayal National Livelihood Mission scheme, to boost the economic activities among women self‐
help groups, the limit of collateral‐free loans was increased to USD 27,041. Besides, all women
having their bank accounts opened under Pradhan Mantri Jan‐Dhan Yojana (a financial
inclusion scheme) are being provided one‐time ex‐gratia of USD 6.76 per month for three
months ( reference no 8 ). These initiatives were expected to support the MFI clients in terms of
supplementing their financial aid for income generation and for setting up micro‐enterprises.
Also, all India financial Institutions such as Nabard, Sidbi and the National Housing Bank had
been provided with special refinance facility of Rs 50,000 crore at the repo rate, Of this, the
National Bank for Agriculture and Rural Development had been allocated Rs 25,000 crore to
enable refinancing of regional rural banks, cooperative banks and microfinance institutions. The
Small Industries Development Bank of India had been given Rs 15,000 crore for on-lending and
refinancing to scheduled commercial banks, non-banks and microfinance institutions. The
National Housing Bank will receive Rs 10,000 crore to support housing finance companies.
Besides, the central bank cut the reverse repo rate by 25 basis points to 3.75 percent. That,
according to Keki Mistry, vice-chairman and chief executive officer at HDFC Ltd., should
encourage banks to lend money.

From the study at grass-root level with 54 cases , these authors personally felt that very few
people had actually benefited from this initiative of microfinance loan in the west bengal state of
Indian context i
During COVID 19 period . It was rather few( three) trillion dollar business of companies based
on poor families of india who needed cash money

Below are a few examples of what happened for microfinance loans that destroyed families.
Most of these microfinance companies are not however licensed or registered or have
permission under Reserve Bank of India for operating their business in a state which is
mandatory ( except Recently Utkarsha microfinance , Bandhan Bank after deposition of 5
crores in 2015. Bandhan Bank however started its business in 2001 with RS 2 lakh INR and
three staff in 2009 as a small MFI unit and now owner of 43,232 crores INR as total , and
44,786 cores of disbursed loan and where from and how that huge profits money came to
Bandhan Bank owner Mr Chandra shekhar Ghosh? (86% came from microfinance loans interest
but No ED or CBI investigation targeted these MFIs companies ?? Why ?? ) and doing all
illegal transactions of money with NGO licence or NBFC licences under section 8 of company
act 2013 or under 1956 company act which do not at all permit for money lending business in
India.
Micro loan disbursement jumped about 20% in the December 2022 quarter to Rs 77,877 crore
over Rs 65,392 crore in the year ago period, backed by 14% rise in the number of new
borrowers.This helped the microfinance industry grow 25% year-on-year to Rs 3.31 lakh crore
at the end of December last year 2022, data released by Microfinance Institutions Network
showed.The industry served 6.4 crore unique borrowers through 12.6 crore loan accounts. The
number of active loan accounts grew almost 19% as compared to 14% rise in the number of
borrowers.terms of regional distribution of gross loans, east & northeast and south account for
63% of the total portfolio. Bihar is the largest state in terms of portfolio outstanding followed by
Tamil Nadu and West Bengal.
West Bengal is one of the top five states in Micro loan disbursement jumped about 20% in the
December 2022 quarter to Rs 77,877 crore over Rs 65,392 crore in the year ago period, backed
by 14% rise in the number of new borrowers.This helped the microfinance industry grow 25%
year-on-year to Rs 3.31 lakh crore at the end of December last year 2022, data released by
Microfinance Institutions Network showed.The industry served 6.4 crore unique borrowers
through 12.6 crore loan accounts. The number of active loan accounts grew almost 19% as
compared to 14% rise in the number of borrowers.terms of regional distribution of gross loans,
east & northeast and south account for 63% of the total portfolio. Bihar is the largest state in
terms of portfolio outstanding followed by Tamil Nadu and West Bengal.
with high amount of loans, nine—North 24 Parganas , South 24 Parganas,
Bankura ,Murshidabad, Jalpaiguri, Nadia, Bardhhaman, Hooghly, Howrah and Cooch Behar—
are from West Bengal where these microfinance companies operate through their salaried feild
people or agents loan field officers , targeting illiterate semi literate poor married women of any
locality in the name of social or families welfare , women empowerment, women upliftment with
their loan through a group system of 12/25/40 women.
According to a report published in Business Standard ( Reference no 9), “In its state-wise ticket
size and macroeconomics analysis, the agency said it has been observed that the average
outstanding per unique borrower is the highest in States of West Bengal and in Assam, and this
has been the case at least for the past three years (2019-2023)”. It also reports that “40-50 per
cent of the microfinance loan portfolio in both Assam and West Bengal are from one or two
institutions. (sic, Bandhan, Ashirbad )” And it indicates the monopoly of 2/ or 3 institutions in the
microfinance sectors.(reference no 9) .According to the SIDBI and Equifax’s Microfinance Pulse,
Vol VII, November 2020 report on microfinance showed that during the Covid- 19 pick lock
down time when so many people were dying from the virus ,in the second quarter (Q2) of the
FY 2020-21, 300% more micro loans were disbursed in india of —worth Rs 323.75bn—vis-à-vis
Q1 of the same FY in terms of volume and 393% more in terms of value. Around 70% of the
loans are in the buckets of Rs 30,000 to Rs 50,000, which means the poor villagers of Bakali
village of jalpaiguri districts West Bengal like Firdousi Begum , Russel ( suffering from calcium
deficiency and low back pain) , Bablu or Saira took those loans from Bandhan Bank
microfinance and ASA India . The Microfinance Pulse also shows that West Bengal is in the
category of states with more than Rs 100 billion loan distribution during covid 19 period of
2020-2021. Such a huge amount of money these MFIs companies possess and where from all
this money come from since 2012 ??
Tamil Nadu State has displaced West Bengal to emerge as the largest State in terms of the
outstanding profit portfolio of microfinance loans ( Reference no 10). According to MFIN
Micrometer Q4 of FY 2021-22, a quarterly report published by Microfinance Institutions Network
(MFIN), the gross loan portfolio (GLP) of Tamil Nadu was as of March 31, 2022 stood at
₹36,806 crore. It was followed by Bihar (₹35,941 crore) and West Bengal (₹34,016 crore). At
the end of Q3 of FY2022, West Bengal however topped the chart with the highest outstanding
profit portfolio of loans at ₹32,880 crore, followed by Tamil Nadu (₹32,359 crore).( Reference no
10)
The top 10 States (based on total microcredit universe) constituted 82.4 per cent of total GLP of
the industry. West Bengal was followed by Karnataka, Uttar Pradesh and Maharashtra.
According to the report, around 64 per cent of the microfinance portfolio is concentrated in the
East, Northeast, and Southern regions of India.
The 41st issue of the Micrometer report said the microfinance industry served 5.8 crore unique
borrowers, through 11.3 crore loan accounts. The overall microfinance industry has a total GLP
of ₹2,85,441 crore as of March 31, 2022, an increase of 10 per cent year-on-year (YoY) from
₹2,59,377 crore as of March 31, 2021. ( Reference no 10)
Lender-wise distribution of microfinance loan-:( reference no 10)
Lender-wise distribution of micro-loans shows that 12 banks in India held the largest share of
the portfolio in micro-credit with a total loan outstanding of ₹1,14,051 crore, or 40 per cent of the
total microcredit universe. NBFC-MFIs are the second largest providers of micro-credit with a
loan amount outstanding of ₹1,00,407 crore, accounting for 35.2 per cent of the total industry
portfolio. Small finance banks (SFBs) have a total loan amount outstanding of ₹48,314 crore,
accounting for 16.9 per cent, followed by non-banking finance companies (NBFCs) at 6.9 per
cent share. Other MFIs account for 1 per cent of the universe.
The report noted that the proportion of NBFC-MFI portfolios in the universe portfolio increased
by 4.1 per cent to 35.2 per cent as of March 31, 2022, though banks continued to be the main
contributors. The geographical distribution of the portfolio also witnessed a change with a
decrease in the share of the east and northeast region of India by 3.3 per cent, while the share
of the south and north regions increased by 1.3 per cent each.
“The microfinance industry has shown good progress during COVID -19 times at Q4 of FY
2022, building on the monumentum profits created in Q3 of FY 2022. The portfolio quality has
improved significantly as compared to the end of Q1 FY2022, when the third wave of Covid-19
with omicron voc had caused widespread stress across the country,” Alok Misra, CEO &
Director, MFIN said, in a statement. “The announcement of harmonised regulations for
microfinance, near normalisation of collection efficiency and recent verdict of the Supreme Court
stating that NBFC regulation is brought under the sole purview of the RBI are hugely positive
trends, which will see good growth of MFIs in 22-23,” he added
Foreign portfolio investors (FPIs) were seen trimming stakes in most private lenders in the
quarter gone by, data compiled from corporate database AceEquity suggests. Out of seven
private lenders, whose shareholding data is out so far, six saw a cut in FPI holdings in the
March quarter. They included IndusInd Bank, Kotak Mahindra Bank, RBL Bank, Bandhan Bank,
Axis Bank and YES Bank. FPI holdings in these six private lending stocks stood in 23-49 per
cent range for the quarter. The top Microfinance institutions operating in India and in West
Bengal (may be these are officially registered with RBI with papers but many may not be often
registered for money lending business by laws in India still in illegal operations in Indian market)
. These are companies operating in west bengal state during covid periods are "Swayam Krishi
Sanstha" ,"Janalakshmi Financial Services" "Ujjivan Small Finance Bank", 'Bandhan Bank",
"Utkarsh Small Finance Bank', "Arohan Financial Services","Fusion Microfinance", 'Equitas
Small Finance Bank", "Grameen Koota Financial Services", "UGRO Financial Services.(
Reference no 11). Others are mostly NBFCs LC or MIFs like " Ashirbad Microfinance Ltd ,
"Nigam Sudha Microfinance Ltd " ,"Progoti Microfinance company Ltd,( considered officially as
fraud company, now) " " Lokenath Trusts", "Dishari'", "Grameen Shakti microfinance services
Ltd", "Adani Financial Services", "Small Finance Bank". "ASA international India microfinance
Ltd ", "Sarala" ,"Mohor, "SKS Microfinance Ltd", "Village", "Share Microfinance" "Annapurna
Finance" ' poonawalla fin corp ,etc to name a few such ( there are about 96 or more big
Microfinance institutions operating in India and 35,473 NBFC companies in India with or without
RBI permission to carry on money lenders business as up to 2013 records and 46 MFI
companies working in the state of West Bengal ) and many such MFI / NBFCs are operating
presently in the West Bengal State of India and in other provinces of India too
Microfinance companies shifted their motivation as social tools to up lift poverty to
commercial buisness and profits making industry and a slipary slope
Microfinance is today on a slippery slope, moving from once good aims turned bad for long past
years. It is facing trouble because the purity of its mission has been totally lost. When it started
in the 1990s , and a microfinance bill passed in the Indian parliament in 2012, microfinance was
probably a financial tool being used for social good. For a long past especially during and after
covid 19 lock down in endemic period of virus, it has increasingly become a social tool used as
a way to generate money for microfinance companies itself , which is why it has lost a lot of its
original sheen. This is one reason why microfinance often runs into heavy weather and hits
periodic roadblocks and many default cases
Microcredit loans, the flagship product of microfinance companies,shifted their motivation from a
not-for-profit approach to a neoliberal model dominated by capitalistic commercial private banks.
While previously loans were tightly regulated in terms of amounts, interest rates and collateral,
and often underwritten by states when necessary, now lending has expanded to allow more
unstable borrowers to take part without state protection or relief in times of crisis.
Microcredit has been a victim of three forces: overhyped rhetoric, imprudent lending, and the
profit-focused nature of capitalism. Thus, microcredit requires a delicate and ongoing balancing
act between undesirable extremes. It’s no wonder then that accusations fly when balance is
lost. MFIs have placed their clients in debt peonage by bombarding them with loans.
Microfinances institute are putting Poor's people in constant debt Traps/ depression/
over works/ many disease/ suicide ?

Many of critics say that microcredits of MFIs or NBFCs had never increased any ones incomes
and did any good , but it had driven poor households into a constant debt trap, in some cases
even leading to depression followed by suicide as we described above. They add that most of
the money from loans are often used for repaying the EMI interest of the loan once it was
taken, instead of being used for any productive investments, thus it failed to empower women at
all ever, and that it has neither improved health nor the education of family members of
borrowers. Moreover, as the access to micro-loans is widespread, borrowers tend to acquire
several loans from different companies, making it nearly impossible to pay the debt back as Mrs
Sapna Bhattacharya from 7/51 Purbapalli sodepur district 24 parganas North described her
below. As a result of many such tragic events like domestic violence, homicide, suicides
happening. More than 25,000 Indians committed sucide during the period 2019 to 2022 for
loans related with microfinance or NBFC loans. Microfinance institutions in India once agreed
on setting an interest rate ceiling of 15 percent,though these MIFs and NBFC however never
followed that 15 percent yearly interest of loans and take much higher interest, unethically,in
unlawful ways in the real worlds .This is an important to take care off by the local state
government to regulate legal MIFs

Several previous studies conducted all over the world concluded, wherever microfinance has
been applied, showed that microfinance companies' microcredit loan was not as effective as it
was expected in getting poor people and their families out of poverty . Rather it submerged
many family members in tremendous financial curse and destroyed families who took MFI/
NBFC / private loans . According to the American Economic journal: applied economics
( reference number 15); microfinance benefits were rather oversold to the public in relation to
their risks,ills, dangers, in India, Pakistan, Bangladesh and sri lanka. The research on psycho-
social impact on microfinance was not given however enough attention, instead they get out of
poverty quickly get a loan to run a small business project was overemphasised, such that
negative repercussions of MIF loans were unforeseen.Therefore according to these authors
microfinance seems to benefit more to the givers of loan ( ie owner of the MIF companies) than
to the receivers or borrowers . Many people who have evaluated the impact of microfinance
have based it on( ?)financial success , not its social, familial and psychological impact i.e. the
pressure of work individuals are under to ensure they pay back the interest of loan. Not enough
assessment is done to ensure balance in recovery as it undermines emotional trauma and
pressure. Introduction of debt to those with a stable income is such a burden; now imagine
introducing debt to vulnerable, overwhelmed individuals facing masses of challenges such as
food security and uncertainty. The impact can only be estimated as devastating.

Few real world cases studied ( Total case 54 ) and Real Worlds scenario of MFIs and
NBFC- MFI micro loan women borrowers from Bandhan Bank and Ashirwad Microfinance
company and others MIFs during COVID -19 lockdown periods in West Bengal state
Districts

Case no -: 1 From Sodepur, North 24 Parganas District at Panihati constituency of West

Bengal assembly-:(Reference no 26)
" …I had to sell off our wedding ornaments as my in law's gift ,my 20 years old unmarried
daughter's gold ornaments,(with Sodepur
Muthoot Fin Corp Gold LoanNear Sodepur Post Office ) , keeping on taking loans after loans to
pay only interest part from one to another private money lenders to clear up my MFIs loan
interest- Mrs Sapna Bhattacharya -wife of Mr Ritwick Bhattacharya - a married 49 years semi
literate women,- mother of a 20 years old daughter, a woman borrower of present residence-
7/51 Purbapalli Village , Post office- Sodepur , District -24 parganas (north ) ,PS -
Khardha,Kolkata -110, said us over telephone with a sad smile and next bursting into her tears
. " ….I had to take microfinance loan ( RS 60,000/INR) from "Bandhan Bank,First Floor, A 55,
Amrabati, Sodepur, North 24 Parganas, West Bengal" first , then from Ashirwad Microfinance
Ltd ( 35000/) , first time, in 2019 Oct with only knowledge of my husband Ritwik, but others
members of my in laws family were then in total darkness, after being members of a ( 22
married women group where my both elder sisters are members too ) self help group goshthi of
our own locality "Bankimpally "at, Sodepur ,under Panihati municipality constituency ,being
lured for easy to get loans without collateral and being highly convinced by loan officers as field
agent's of Bandhan Bank microfinance and Ashirwad Microfinance Ltd, operating in sodepur
and khardah, panihati and by gosthi members,to feed and for medical treatment expenditure
purpose of my 84 years old mother ( Mrs Shanti Adhikari ,wife 85 years old widow of late Anil
Adhikari, who is living alone in one room small flat at Ghola, sodepur ) and to support and look
after my two younger sister's (Savita Chakraborty wife of krishnendu chakrabarty & Bandana
Dey wife of late Raju Dey, living in slum areas of Agarpara ) family, during lock down periods of
COVID- 19 ( 2019 nov -22 December) and to meet up MFI company's interest, i had to borrow
loan successively from Mr. Tapan Saha of Loknath microfinance trust ,Mr . Chandan Saha of
"Nigam Sudha Microfinance Trust ", "Unity Welfare Society ', 'Progoti microfinance "," Beraberi
Deshari," 'jiban Utthan Microfinance Ltd " operating ( I didn't knew that these MFIs/ NBFC MIFs
companies / and usurious money lenders are illegal money lenders or fraud companies by
Indian laws, without any RBI permission or ROC to operate in the field ) operating in Sodepur ,
24 parganas
( north) ,Kolkata-110, West Bengal. I am now a debt trapped (uncontrolled diabetics) woman of
around Rs 14 lakh INR- I don't know where to repay this amount . My husband Ritwik
Bhattacharya of same address with a B.Com ( Calcutta University) degree ,50 years old, a
diabetic ( he suffered in 1999 to 2005 from bipolar psychiatric illnesses- schizoid bipolar mood
disorders and was treated at Institute of Psychiatry at SSKM hospital Kolkata -20, with
antipsychotics drugs lithium,risperidone , valproate, SSRI drugs by his eldest MD pathology
doctor brother ) also was trapped by convincing the social welfare programmes of MFIs and did
loan from others non financial banking companies/ organisation when in 2020-2021 his small
trade- a start up business units ( his woking shed was within our home premises as his
rehabilitation program -once set by his eldest doctor brother in 2007 for him to sustain our life
and to get him engaged in working) ran in losses during the COVID -19 pan and partial
lockdowns period in 2020 March to 2022 October and he had to pay salaries and bonus to his
four marginal labours in lock down times and compensation money settlement to a labour for
loss of part of his right hand index finger in a sudden machine accident, etc, though Ritwik could
not sell his finished products in local markets for covid 19 lockdown of market and his loan
status to these NBFC companies now reached to another Rs 10 lakh ( as he stopped EMI since
2020 and now he was summoned by court of laws for a settlement on 20th March, 2023 by a
company he borrowed 3 lakh rupees loan ) . We both are now in great financial trouble for only
MFIs and NBFC loans as their recovery agents and recovery field workers ( we use to call them
jamdoots) are almost daily knocking the door and we became ill doing overworking both day
and night times since October 2022 to repay the loan . What we realised now is that we did a
great blunder in our life ,trusting the field agents, loan officers of "Bandhan Bank" and
Ashirbad microfinance ltd trusting that Microfinance loans are helping for
empowerment of poor women and their families . Rather it is a big curse for many poor
families. I had to sell our kitchen utensils , all machines my husband Ritwick once purchased
for his business and sometimes I had to deny our food, my antidiabetic oral hypoglycemic
medications for days ,and for last five months unless we had some kind of monthly financial
support of Rs 23,000/ per month from my husband's eldest brother-, a MD Pathology doctor by
his profession ( now a WB state govt. pension holder ) to feed us by sending his bank interest
part of money ( he had as his superannuation benefits in march 2021), to sustain our life , so
that we can make these loan repayments …." . And.." I had to steal every month (from January
2019), average rupees 10,000/ , even from his sent money too, to pay up interest to my
personal private money lenders through my sister's , without knowledge of any one in my in-
laws house. A great sin i had to commit to meet up loan interests to look after my mother and
elders sis family during COVID time (reference no 26)

case -2 , as it was reported by Mr Madhusudan chatterjee from Bankra district of West

Bengal,india….…( reference no 27)
Dulali Bauri and Reba Barui of Bankura district, West Bengal , borrowed Rs 70,000 INR from a
MFIs on convincing by loan officer. She was scheduled to pay a weekly instalment of Rs 1,300
INR for 104 weeks. For a principal loan amount of Rs 70,000, Dulali Bauri's total payment would
be around Rs 1,35,200 over two years; this amounts to an interest rate of over 50% by MFIs
which is illegal claim by MIFs
Case 3-: Bankura district
Mithu Nioyi, a borrower who had loaned Rs 30,000/ from Bandhan Bank Microfinance
institution. She received Rs 27,500; the rest was deducted as insurance. As per the loan terms,
Nioyi has to pay Rs 2,000/month for 18 months. She paid the first 10 instalments but is unable
to pay anymore. Nioyi, a widow, said she had to leave her home due to alleged threats from
loan collectors or Recovery agents officer
case 4,5,6 from Bankura district -:
Nasima Bibi and Ayesha Bibi borrowed Rs 40,000 from MFIs in 2020 in covid -19. They could
not pay instalments during COVID- 19 lockdowns for several months. After that, their instalment
amounted to Rs 2,000/month. However, the collector RA said they still needed to pay Rs
30,000. When the reporter Mr Chatterjee looked at the document, he found that the document
showed an interest rate of 24%.However, more money was taken from them. This amounts to a
clear case of cheating and fraud by MIFs.
MFIs companies in India and in the state of West Bengal often use illiterate or semi literate
needy women of the same group to collect their loans from group members too. The group
members are allegedly threatened that if one member fails to pay instalments, the loans of all
others will be terminated. As a result, when a group member struggles to pay instalments, other
members often pressure them to do so. This is called straining interpersonal relations.
Moreover, the alleged inhumane and criminal behaviour of debt collectors
( jamdoots) has led to disastrous situations in the family. Some women have reportedly even
attempted to die by suicide in the district, while many are absconding. "We have several cases
of women trying to die for these types of loans."".... We have several cases of women
attempting to die by suicide in recent months; however, no actual suicide has come to our
notice. If we get a report, we will then conduct a fact-finding inquiry and take appropriate
actions against MIFs….," said an Additional Superintendent of Police, Bankura district of West
Bengal to Mr chaterjee .However police authorities SP / ASP must be aware of unauthorised
illegal unregistered with RBI or with ROC MFI /NBFCs /usurious money lenders are operating
in districts in West Bengal or in the country and they must be also aware that provoking any
person either by threat or by any mental , physical or social pressure for attempting for sucide or
homicide is criminal offence for any loan recovery agents , for MIFs loan officials and local
police station often denies to take even a GD or FIR against microfinance loan collectors or
officials or companies . The home secretary of all states must look after this issue and issue
necessary government orders . MFIs NBFc -MFIs have started other methods recently to keep
women trapped in debt during COVID- 19 period. After a borrower woman paid five to seven
instalments, women are told they are again eligible for another loan. After deducting the money
for the old loan and re-insuring the new one, very little money is given to these women under
the new loan. After that, women are forced to pay more money with much higher interests. If
they want to repay these loans, they often have to borrow from another money lender at a
higher interest rate, as no other MFI will loan these women. MFIs seem to have a tacit
understanding amongst themselves for exploiting women in the name of self help groups -In
Bankura district, several private banks run MFIs, such as HDFC, Axis Bank, Bandhan Bank
Ashirbad etc. Along with that, there are entities like L&T Aasha Finance. When Mr chatterjee,
the reporter contacted Nasiruddin Altamas,an Assistant Manager, Bandhan Bank Microfinance,
about its high-interest rate, He said that banks fix these rates, and the women are also
paying.``...We really do not infact care what borrowers do with this money. Our work gets done
when we get the instalment money,..." he said.Suman Karmakar (name changed), a debt
collector of Aasha Finance in Bankura, said it is easy to collect money from women as they
cannot stay outside for long.They must bring money from somewhere. We get a daily based
commission on the collected money. This is important for recovery agents because we only get
Rs 7,000/ to 10000/ INR as our monthly salary," he said. Debt collectors of microfinance
companies are often from outside temporarily appointed by the company; women are rarely
informed by papers about the offices of these MFIs,NBFC and whether they are legal,
registered or not with RBI or ROS . "...We change our office addresses almost every six
months so that no one can trace us later . We do not think it is necessary to tell members of
groups about this. They need money; and we give it…." said Mr Buddhadeb Bairagya, manager
of Village Microfinance, Bankura branch, "..we know well that we are doing illegal money
laundering but no one dares to complain to police against us . They won't get loan next (
reference - 27 )
Assam state of india and Microfinance loans in 2020 COVID times
In year 2020 February ,at Dibrugarh of Asam state, Women of Moran, under Dibrugarh district
and Mahmara under Charaideo district of Assam submitted a memorandum to the Magistrates
of the concerned areas to allow them to commit suicide if microfinance companies there are not
shut immediately by enforcing laws. The women accused that recovery agents of the
microfinance companies did all sorts of harassment over interest rates on the loans provided."
Our families are below the poverty line. We took the money as we needed it. (Who doesn’t need
money?) We just took the loans but we have been repaying the loans. However, if one of us
was unable to pay the money on time, the recovery agents harass her and extract money in
other ways. We request the government to take stock of these situations and help us,” said one
of the protesters.( Reference no -24) They also demanded that they must be relieved from the
interests of the loans that they had taken in the first or 2nd places. It may be mentioned here
that several organisations had earlier staged a protest against the functioning of microfinance
companies with competitive ways with another MFI or with NBFCs, which they alleged had
ruined the rural economy too. They thereafter sought a ban on the microfinance companies and
non banking financial organisations in Assam state. If it is so in Assam why no ban order be
passed by the West Bengal State govt?? Case 7 in Beldanga village of Burdwan District of
West Bengal (reference no 12,19)
Bamdeb Malik (35), a sharecropper, breathed his last after allegedly consuming poison in East
Burdwan district's Beldanga village. He was burdened with an unmanageable debt of
microfinance after a lean harvest. Being a poor marginal farmer, he had taken a loan of Rs
50,000 from microfinance institutions (Bandhan Bank) and Rs 1,40,000 from local money
lenders.Most of the loans accrued by the villagers in Beldanga village were from Bandhan Bank
microfinance, and the infamous loan with more than 48% interest rate given to sharecroppers is
termed "wife mortgage loan" The desperation that led Malik to end his life is also being felt by
marginal farmers of the village like Nakur Malik, Achin Modak, Sunil Ghosh, and others in
groups . All of them are now standing on the brink of economic devastation of their family. In
many cases, the poor, marginalised farmers and people had alleged that microfinance
organisations have made the farmers sign in white paper bonds . Even after making payments
regularly, many alleged they were suffering even if they have faltered on a single instalment to
repay their loans during the COVID -,19 lockdown period.( reference no 19)
Case -: 8 in Bindupara Village of Murshidabad District ,West Bengal (Reference 21)
Another woman who has demanded From West Bengal,in 2021, Mr Sadhan Sinha 40 years old
(who used to earn Rs 15000 to 20000 a month) of Bindupara Village of Murshidabad
District ,West Bengal ( Ref no- 12, 21) is another victim example in 2021. He took a loan of Rs
1 lakh from a MIF operating in Murshidabad and had been unable to pay his monthly
instalments of Rs 3,400 for May and June 2021 and he begged for a few days’ time but
recovery agents did not listen. The recovery agents sat down outside the house, using abusive
languages and saying they would not leave without collecting the dues. "...My husband felt so
humiliated that he killed himself…,” said weeping Mamoni, mother of two sons, aged 18 and 15.
( Ref no 21) Sadhan’s decision to take the loan in January 2021 and his subsequent suicide
underline the fact that how millions of ordinary Indians were taken unawares by the covid- 19
pandemic’s second wave, blamed partly on the central government’s short-sightedness in
prematurely declaring victory over the virus and letting its guard down.
Reserve Bank of India ordered debt recasting, increase the moratorium period minimum
by another two years with minimum EMI as Relief but which MIFs NBFC cares -:
The Reserve Bank of India however tried to give all kinds of loan borrowers relief by instructing
all banks and all financial institutions to consider a debt recasting, provided EMI dues have been
cleared before February 2020 i.e. before the first state or pan India lock down announced for
COVID-19 by government. But, as Mr Sadhan’s death suggests, not every borrower had access
to the relief by these MFIs companies, only because of lack of knowledge and information ,as
they are mostly less educated and poor people. While the debt recasting is a prerogative of
banks or the micro finance companies or NBFCs , the problem is that most people who are in
dire need of the facility don’t know about RBI directions on this issues
There was relief to those borrowers who had opted for loan payment restructuring under the RBI
scheme as well. The RBI permitted the MFIs ,NBFCs ,Banks and to all lending entities to modify
the plans of repayment of loans and increase the moratorium period minimum by another
minimum two years with minimum EMI .The RBI said that after all MFI,NBFC banks ,receive a
restructuring proposal from any borrower to repay principal loan, they must have to take a
decision on the application of borrowers within 30 days and in favour of borrowers. This will
happen when the lending institutions and the borrower will agree to work out a resolution plan
according to the capacity of borrowers to repay the loan after maintenance of his family at
minimum daily wages he or she earns. After this, the resolution plan must be finalised and
implemented within 90 days from the date of invocation( reference 22,,26)
Hyderabad suicides for MIFs ( reference no 13)
When these authors looks back at past in 2010s in Hyderabad, Andhra Pradesh districts 30 to
45 pepole committed suicide due to microfinance loans, due to coercive method of repayment of
microfinance loan by MFIs .These suicide were reported from different districts of Andhra
Pradesh within 45 days from January 2010 . The story was that MFI companies charged
exorbitant interest on the principal amount and borrowers were caught in a situation where they
were forced to borrow from another money lender to repay the existing loan . The borrowers
were caught in vicious cycle of loans which they can not repay this forcing them to end their life
(Ref no 13)
The Union Ministry of Home Affairs India informed the Indian Rajya Sabha in the Budget
Session 2020 that unemployment and indebtedness claimed at least 25,000 lives in India,
between 2019 and 2020 period ( Refrence no 14) .Union Minister of State for Home Affairs , on
February 9th,2020,told that a total of 9,140 people died by suicide due to unemployment, while
16,091 people ended their lives due to indebtedness to MIFs and NBFCs companies loan
indebtness during this COVID 19 periods . Also at least 5,213 people died by suicide due to
bankruptcy or indebtedness in 2020, 5,908 in 2019 and 4,970 in 2018.With 19,909, the majority
of suicides were reported in Maharashtra followed by Tamil Nadu (16,883), Madhya Pradesh
(14,578), West Bengal (13,103) and in Karnataka (12,259). These states accounted for 13 per
cent, 11 per cent, 9.5 per cent, 8.6 per cent and eight per cent of the total suicides,
respectively.Bankruptcy or Indebtedness’, and unemployment accounted for 3.4 per cent and
2.3 per cent of total suicides in the pandemic year 2020 -2021.( Refrence 14)
There are many such stories ( at least 54 studied cases by these authors) with us in Kolkata,
Howrah , Coach Bihar ,Nadia, North 24 Parganas, South 24 Parganas, Murshidabad ( ref no
26 ) , Nadia, Jalpaiguri districts of West Bengal state .

Microfinance was once meant propaganda to lift up people out of poverty, but the women of
Howrah, ( in Shibpur Constituency ( ref no -11) ,in Panihati constituency, in Beldanga Village
of East Burdwan ( reference no - 19) say it's become now a big curse for many families even of
entire village , who are in microfinance or NBFC -MIF debt Trap now
Debt may be good but never in the state of indebtedness( Reference no 26)
Debt may be good but never in the state of indebtedness! It has both qualitative and quantitative
implications. Propensity to debt, especially “indebtedness” is a matter of big concern. Impact of
indebtedness varies both in degrees and dimensions. The state of being in debt (indebtedness)
covers both personal and behavioural finance and is blended with positive and negative
outcomes. On the minor positive end , people who have easy access to money to debt from the
bank , MFIs may have some chances for temporary financial wellness, provided the money is
used for productive , gain business. The negative outcomes of money lending are desertion,
huge distress and depression of the indebted consumers. Many times, such incidence results in
forced migration as observed in the cases of absconding. The extreme end of indebtedness
leads to suicidal tendencies often culminating at self-killing! Such unpleasant incidents
potentially affect the present as well as the future of a person. Sometimes the shock of
indebtedness cascades down to a couple of generations. Recent agitations of the Tamil
farmers, protesting for the announcement of a drought relief package and loan waiver, are
evidences to what debt-distress is and what it can do!(reference no 10)
PMLA laws: what the Indian government is doing for MIFs, NBFCs and unsurious money
lenders??
The people who are working as CEOs / Directors/ owner or staffs or loan officers or loan
recovery agents of NFBC and non RBI or ROC registered MFIs must be put under the lenses
of The Prevention of Money Laundering Act, 2002 (“PMLA”) and the rules issued thereunder
(“PML Rules”) in India , provide the key legislative framework for the prosecution of unsurious
money lenders, money laundering business and gaining huge ,unbelievable profits out of it from
market . The primary legal authority responsible for investigating and prosecuting usurious
money lending / money laundering offences under PMLA at the national level is the Directorate
of Enforcement (“ED”), under the aegis of the Department of Revenue, Ministry of Finance. In
addition to the above, regulators such as the Reserve Bank of India (“RBI”), Securities &
Exchange Board of India (“SEBI”) and the Insurance Regulatory & Development Authority of
India (“IRDAI”) are also empowered to deal with issues relating to usurious money lending /
money laundering activities and lay down guidelines on anti-money lending/ laundering (“AML”)
standards. These guidelines, read with PMLA and the PML Rules, form the core of the legal
framework for AML law and enforcement.
Under PMLA, the offence of money laundering arises from the commission of any offences
mentioned in the PMLA schedule of offences and proceeds of crime arising thereof. “Money
laundering” is defined as any act where a person directly or indirectly attempts to indulge,
knowingly assists, or knowingly is a party to or is actually involved in any process or activity
connected to the proceeds of crime, including its concealment, possession, acquisition or use
and projecting or claiming it as untainted property; such acts shall be treated as a money
laundering offence. Further, where any property is derived or obtained directly or indirectly by
any person as a result of a criminal activity relating to an offence specified in the schedule to
PMLA, including the value of any such property or where such property is taken or held outside
the country, then the property equivalent in value held within the country or abroad amounts to
proceeds of crime and, hence, amounts to money laundering. Therefore, by the very nature of
its definition, money laundering involves obtaining/deriving proceeds arising from the
commission of a criminal offence. Section 4 of PMLA criminalises the offence of
unauthorised lending of money with high interest . Along with the PML Rules, PMLA as
framed thereunder prescribes certain compliance and reporting requirements of reporting
entities that include, inter alia, banking companies and financial institutions registered with
Reporting Entities such as RBI (viz. non-banking finance companies (“NBFCs”), payment
system operators, etc.), intermediaries (viz. entities registered with securities market regulators,
pension fund regulators, etc.) or persons carrying out a designated business or profession as
may be prescribed (viz. a person carrying out activities for playing games of chance such as
casinos, dealers in precious metals, precious stones and other high-value goods, and persons
engaged in the safekeeping and administration of cash and liquid securities on behalf of other
persons, etc.).specified in Parts A–C of the PMLA schedule, the commission of a Scheduled
Offence attracts the provisions of PMLA.
Conclusion -:
In conclusion, to me and for Poor's , job less people , illiterate, semi literate people, people of
urban, semi urban, rural villages MICROFINANCE COMPANIES IS NOT AT ALL A BLESSING
IT IS RATHER A BIG CRUSE. IT SHOULD BE STOPPED IMMEDIATELY and MFI company
owners/ their agents ( Money landers ) to be punished for illegal money lending to borrowers
with exorbitant high interest rate beyond nationalised bank interest rate or RBI Bank interest
rate fixed for Microfinance registered companies with RBI .Government of West Bengal and
Govt of India should take interest in sensitising people about the curse of microfinance loan
otherwise the poor people will go more poorer and borrower families will be destroyed.

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