Recovery of Loans Sanctioned under Rashtriya Mahila Kosh

The following are the details of mechanism for recovery of loans sanctioned under the Rashtriya Mahila Kosh (RMK) of the Ministry of Women and Child Development:

The RMK loans are recoverable from Intermediary microfinance organisations (IMOs) over a repayment period of 3 years (including the grace period of 6 months) in quarterly installments along with interest @ 8 per cent per annum on reducing balance. RMK follows the following procedure for recovery of loans:

(i) The repayment schedule is defined in advance, envisaging quarterly payment of principal and interest amount. The requisite Post Dated Cheques (PDCs) are collected as a risk mitigation measure.

(ii) Demand letters are issued before due dates to all IMOs at pre-defined due dates.

(iii) Quarterly list of defaults is reviewed regularly. Each defaulting NGO is contacted, either telephonically or through letters, to enquire about the reasons for default and the likely time for clearing of default.

(iv) The default loans accounts are handled as under:

(a) In the first instance reminders are sent to the defaulting IMOs asking them to pay the overdue amount, urgently.

(b) The defaulting IMO is sent first reminder, followed by another reminder and if required final warning (after 30 days from second reminder) to clear the overdues. If overdues still persist blacklisting is resorted to in case, an NGO commits default of 4 quarters of interest and / or 4 quarters of principal, or both. This has been an effective measure of recovery. Black- listing of the defaulting IMOs is undertaken mainly to pressurize for urgent clearance of overdue. In case the IMO clears the loan overdue, it is removed from RMK black list.

(c) Post-dated cheques given by NGOs are deposited in the concerned banks; if returned unpaid, case(s) under section 138 of Negotiable Instrument Act (NIA) are filed in the Court.

(d) In case of chronic default, a ‘recall-notice’ is also issued calling the defaulting IMO to pay upfront the entire outstanding amount of the loan dues, in a month’s time. If the recall-notice is not complied with, a PDC is lodged for the entire outstanding dues (loan instalments plus interest).

(e) Suits are filed or wherever applicable, Arbitration Process is followed, to recover the dues from the NGO where the loan repayment period has completed, as per the loan agreement.