Microfinance Focus, December 19, 2011: Considering the specific needs of the microfinance sector, the Reserve Bank of India has allowed microfinance institutions to raise External Commercial Borrowing (ECB) up to USD 10 million during a financial year.

In a notification, RBI said that NBFC-MFIs will be permitted to avail of ECBs from multilateral institutions, regional financial institutions, international banks, foreign equity holders and overseas organizations. ECB funds should be routed through normal banking channels, it said.

It has also been decided that Non-Government Organisations (NGOs) engaged in microfinance activities can avail of ECB up to USD 10 million or equivalent per financial year under the automatic route as against the present limit of USD 5 million or equivalent per financial year.

Companies registered under Section 25 of the Companies Act and engaged in micro finance will be permitted to avail of ECBs from international banks, multilateral financial institutions, export credit agencies, foreign equity holders, overseas organizations and individuals, the notification said.

As eligibility criteria, MFIs should have a satisfactory borrowing relationship for at least 3 years with a scheduled commercial bank authorized to deal in foreign exchange.