Download: RBI Circular on NBFC-MFIs

Microfinance Focus: December 02,2011:


DNBS.CC.PD.No. 250/03.10.01/2011-12 December

As indicated in the Second Quarter Review of Monetary Policy in November 2010, a Sub-Committee of the Central Board of the Reserve Bank (Chairman: Shri Y. H. Malegam) was constituted to study issues and concerns in the MFI sector. The Committee submitted its report in January 2011. In the Monetary Policy Statement 2011-12, it was announced that the broad framework of regulations recommended by the Committee has been accepted by the Bank.

Download: Circular on NBFC-MFIs - Dec 2nd.pdf

RBI Circular on NBFC-MFIs


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RBI Circular on NBFC-MFIs

The contents of this circular are not new, but I had hoped that the final rules would clarify the following questions.

As they stand, the rules merely offer room for evasion and uncertainty; lawyers and ill-intentioned people thrive on uncertainty, but honest institutions and above all needy clients do not.

1. How can an MFI know what a household's income or it's indebtedness is ? Many households themselves don't know, here in UK and in Indian slums and villages too.

2. Money is fungible; hence how can a lender be sure as to the purpose to which his (or her) loans will be put ?

3. Multiple membership of SHGs; this is normal in AP, common elsewhere, and perhaps regrettable, but how and by when are people expected to extricate themselves from SHGs, how are their SHGs to cope with members' departures ?

Malcolm Harper

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