Bihar Assembly Passes Bill Mandating State Registration For Microfinance Firms

The Bihar Legislative Assembly has passed the Bihar Micro Finance Institutions (Regulation of Money Lending and Prevention of Coercive Actions) Bill, 2026, to regulate microfinance firms and recovery practices.

The bill mandates that lenders obtain prior approval from the state Finance Department before disbursing loans and register at the state level, even if licensed by the Reserve Bank of India. Operating without registration will constitute a criminal offence. The law provides for special courts in each district to hear cases involving individuals allegedly driven to suicide due to usury. These courts will be presided over by a first-class judicial magistrate. The Director of Institutional Finance will act as the nodal officer, and registration will be completed within 90 days after document verification.

Finance Minister Bijendra Prasad Yadav said the law aims to regulate lending and recovery practices. Data from Sa-Dhan show that Bihar has over 22 million microfinance loan accounts with outstanding dues of Rs 57,712 crore.