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RBI opposes NDA financial inclusion plan

The new financial inclusion push, Sampoorn Vittiyea Samaveshan, which Prime Minister Narendra Modi is widely expected to unveil on August 15 does not quite have the central bank on its side. Top government sources told ET that the Reserve Bank of India (RBI) was in disagreement with three critical elements of the drive.

it opposed the Rs 5,000 overdraft, the credit guarentee fund, and the aggressive timelines. on all three counts, it was over-ruled. a quick story with my colleague dheeraj tiwari, this one.

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RBI broadly accepts the Malegam report

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.

Malegam-med

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.

SIDBI hauled up by RBI et al

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.

MFIs and the Priority Sector

A Reserve Bank of India committee headed by executive director VK Sharma, in its draft report, has recommended that the priority sector status, which is accorded now to banks’ exposure to Non-Banking Finance Companies, or NBFCs, should be withdrawn.

More, here.

Through the scanner darkly

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…

More here.

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.