The bill, on being passed, would replace the Ordinance issued by the government on October 15 following a spate of suicides by many small borrowers.
The Andhra Pradesh Micro Finance Institutions (Regulation of Money Lending) Bill, 2010, introduced in the assembly by Legislative Affairs Minister D Sridhar Babu seeks to "protect the women self-help groups from exploitation by micro finance institutions,".
The state government has pointed out that the MFIs were using the women SHGs to expand their business by giving loans at usurious rates of interest, which in some cases extended up to 54 per cent, without verifying their capacity to repay.
The MFIs were also using coercive methods with the help of recovery agents to recover the loans from the borrowers.
"This has resulted in many cases of suicide of rural and urban poor and molestation of the borrower or the family members," the government said in the statement of objects and reasons of the bill.
The bill, however, does not talk about any interest cap on the MFI loans though it makes registration of all MFIs with the Registering Authority in each district mandatory.
The new law bars MFIs from seeking any form of security in the form of pawn, pledge or other from a borrower nor charge any other amount except that prescribed in the rules.