The issue of putting a ceiling on the rates at which microfinance institutions (MFIs) are lending is gaining heat with two schools of thoughts arising on the matter. While one says that the towering rates at which MFIs lend are erroneous while the other says that completely putting MFIs out of the game would be a huge setback for the poor people who rely on many activities on loans received from MFIs.

Officials in Andhra Pradesh had once brought a stop on the operations of MFIs but then the RBI had come and removed all bans on MFIs and even said that there would not be any capping on the rates charged by them.

But presently the finance ministry has directed banks that they should keep a check that the MFIs they are funding do not lend at more than 22-24% to the final borrower. Banks are worried that they might not be able to control the rising interest rates being charged by MFIs.

Major resentment against the issue has started coming after the IPO issue by SKS Microfinance, the largest MFI in India.