Following the promulgation of the Andhra Pradesh Micro Finance (Regulation of Money Lending) Act, which includes provisions intended to curtail coercive collections practices by microfinance institutions (MFIs) and their agents, many MFIs are considering cutting back their operations in Andhra Pradesh in favor of seeking expansion in other prospective markets [1]. Since the law was enacted late last year in response to complaints of high interest rates and coercive loan recovery practices, commercial banks reportedly have not resumed funding to MFIs despite various forms of encouragement by the Reserve Bank of India, India’s central banking authority, including recent relaxation of asset classification rules for bank loans to the microfinance sector [2].
By Jacqueline Foelster, Research Associate
About Reserve Bank of India (RBI): Established in 1935, the Reserve Bank of India (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 consists of twenty-two regional offices.
Sources and Resources:
[1] Business Standard, “After SKS, more MFIs to cut exposure to Andhra”, http://www.business-standard.com/india/news/after-sks-more-mfis-to-cut-exposure-to-andhra/424335/
[2] MicroCapital.org Article, February 8, 2011, “Reserve Bank of India (RBI) Relaxes Rules in Effort to Ease Microfinance Institution (MFI) Liquidity Crunch”, https://www.microcapital.org/microcapital-brief-reserve-bank-of-india-rbi-relaxes-rules-in-effort-to-ease-microfinance-institution-mfi-liquidity-crunch/
MicroCapital Microfinance Universe Profile: Reserve Bank of India (RBI), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Reserve+Bank+of+India+%28RBI%29
Browse the MicroCapital Universe and add your entry to the wiki at https://www.microcapital.org/microfinanceuniverse/tiki-index.php
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