The proposed legislation for regulation of the for-profit microfinance sector has a number of problems. It makes the Reserve Bank of India the sole regulator of the sector when this is the domain of the states rather than the central bank. The proposal will permit a back-door entry for the MFIs to collect savings which is not a healthy idea. Any proposal should be drawn on the experience of the states and the for-profit MFIs should be regulated as moneylenders.