NABARD seeks feedback on Microfinance Regulation draft

Microfinance Focus, Feb 22, 2010: Based on the recommendations of the Rangarajan Committee on Financial Inclusion, which focused on financial Inclusion in four specific terms – Access to Financial Services – (savings, credit, insurance and transfer of money), Timely Credit, Adequate Credit and Affordable Credit, NABARD has posted the draft on its website seeking suggestions and recommendations from the stakeholders in the microfinance industry.

It said the microfinance regulatory situation in India show multiple mechanisms for regulation of various entities engaged in the microfinance space like: NGOs, Trusts and other not-for-profit institutions functioning as financial intermediaries are out of the purview of the direct supervision of any financial regulatory mechanism.

In the absence of clear regulations, there is a state of dilemma for these Microfinance Organizations (MFOs)  undertaking microfinance activities, especially savings and deposits, the post stated and sought to examine the scope of safeguarding interests of customers at one end and giving functional clarity to MFOs.

In association with the Ministry of Finance, Government of India, NABARD has taken a proactive role on the issue of streamlining regulations for microfinance sector to achieve fast tracking the financial inclusion and microfinance in India. The draft of the document related to regulation and development of microfinance sector has been put up for the comments on NABARD website. To read the draft document, please click here.

Suggestions from the stakeholders on the following key areas are invited:

* Composition of Microfinance Organizations, their registration, functions/activities, Accounts, Reserves, Audit and Returns

* Composition and role of Microfinance Development Council

* Functions and powers of National Bank

* Constitution of Microfinance Development and Equity Fund

* Customer protection and Redressal Mechanism

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