In the middle of this week, the RBI broadly accepted the reccos of the malegam committee report. With that, India’s beleaguered MFIs finally have a regulatory framework under which to operate. In this quick and dirty story, I try to understand what the new framework means for the MFIs.
a day after after the initial optimism, the mfis figure that the old adage of ‘what one hand giveth, the other taketh away’ fits the malegam committee report perfectly.
A day after a central bank appointed committee submitted its report, small microfinance institutions (MFIs) say the recommendations if accepted would wipe away their presence in the sector because of stringent capital requirements.
a story that i wrote with my colleague John Samuel Raja D.
In the past two months, RBI has informally directed Sidbi to not invest in any non-banking finance companies without its approval… Sidbi has also been told by the finance ministry to ensure that Indias MFIs do not levy onerous interest rates. Further,it has been told to commission a study on interest rates and to start a forum where banks can compare notes about MFIs.
Within RBI, Nabard and the finance ministry, the feeling that Sidbi could have done more to keep errant NBFC-MFIs in line grows.
India’s booming microfinance segment is under the scanner, with the Reserve Bank of India (RBI) issuing a veiled warning that it could be taken off the priority sector lending list of banks if the industry fails to improve its governance standards… The RBI officials reportedly told MFI executives that the central bank was aware of the extent of benami loans being given by MFIs, the practice of writing off bad loans and sloppy corporate governance in some of the entities…
update: a couple of months later, these questions about corporate governance rose to a higher pitch when the bosses of sks microfinance decided to sell their shares in the company before its IPO. Also see this. And this.