MICROCAPITAL BRIEF: Reserve Bank of India to Publish Report on Regulating the Indian Microfinance Industry by End of January 2011

According to the website of the Hindustantimes Newspaper, the Reserve Bank of India (RBI), the central bank of India, is preparing a report making recommendations on regulating the Indian microfinance industry, which has recently come under intense scrutiny.

The report, which would be completed by a committee led by Y H Malegam before the end of January 2011, would specifically explore the appropriate amount of regulatory oversight on non-banking finance companies (NBFCs), a legal structure through which some microfinance institutions (MFIs) operate. An unspecified source told the Hindustantimes that after the report is complete “a holistic view will be taken on issues relating to PSLCs [priority sector lending certificates, a status currently enjoyed by the microfinance industry that allows MFIs to access financial resources at low interest rates. The RBI has reportedly been planning to remove the microfinance industry from the sector [4]] and bank lending to MFIs.”

The Indian MFIs reporting data for 2009 to the Microfinance Information Exchange (MIX), the microfinance information clearinghouse, have an aggregate loan portfolio of USD 4.6 billion, total assets of USD 5.1 billion and 26.4 million active borrowers.

About the Reserve Bank of India (RBI):

The Reserve Bank of India (RBI) is India’s central banking authority. Established in 1935, the RBI undertakes consolidated supervision of the financial sector comprising commercial banks, financial institutions and non-banking finance companies. The current focus of RBI is to supervise financial institutions, consolidate accounting standards, resolve legal issues in banking fraud, monitor non-performing assets and supervise the rating model for the banking sector. RBI operates twenty-two regional offices as of 2010.

By Trevor Kwong, Research Assistant

Sources and Additional Resources:

[1] Source Article: Hindustantimes: RBI panel report on MFIs loan recovery mechanism by January:

http://www.hindustantimes.com/RBI-panel-report-on-MFIs-loan-recovery-mechanism-by-January/Article1-621118.aspx

[2] Microfinance Information Exchange: India:

http://www.mixmarket.org/mfi/country/India

[3] MicroCapital Universe: Reserve bank of India (RBI):

https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Reserve+Bank+of+India+(RBI)

[4] MICROCAPITAL BRIEF: Reserve Bank of India (RBI) Report Recommends Withdrawal of Priority Sector Status from Microfinance Institutions (MFIs)

https://www.microcapital.org/microcapital-brief-reserve-bank-of-india-rbi-report-recommends-withdrawal-of-priority-sector-status-from-microfinance-institutions-mfis/

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