The Business Standard, an Indian financial newspaper, recently reported that the regulations recently issued for the microfinance sector by the Reserve Bank of India (RBI), India’s central banking authority, and the Regulation of Microlending act issued by the government of the state of Andhra Pradesh in 2010 are creating confusion over the regulatory jurisdiction of each entity. The discrepancies, which include the repayment schedule of loans, the interest rate cap and the treatment of outstanding loans that were previously extended by MFIs at rates exceeding the new caps, “may further affect the already crippling microfinance sector in the state [of Andhra Pradesh].” Andhra Pradesh reportedly plans to address the incongruence with RBI by adjusting state-level regulation.
By Jacqueline Foelster, Research Associate
About Reserve Bank of India: Established in 1935, the Reserve Bank of India undertakes consolidated supervision of the financial sector comprising commercial banks, financial institutions and non-banking finance companies (NFBCs). The current focus of RBI is to supervise financial institutions, consolidate accounting standards, resolve legal issues in cases of banking fraud, monitor non-performing assets and supervise the rating model for the banking sector. In 1979, the National Bank for Agriculture and Rural Development (NABARD) was formed at the behest of RBI to provide regulatory oversight to regional rural banks (RRBs) and to promote the development of agricultural lenders: tasks that had been the responsibility of RBI. While all microfinance institutions (MFIs) and non-banking financial companies still operate under RBI regulations, the responsibility for inspecting nonprofit MFIs, agricultural lenders, RRBs, state cooperative banks, district central cooperative banks and state cooperative agricultural and rural development banks was transferred to NABARD. RBI maintains these responsibilities for for-profit MFIs. Although RBI was originally the parent organization of NABARD and until October 2010 held a 72.5 percent stake in the outfit, RBI owns a one-percent stake in NABARD as of 2011.
Source and Additional Resources:
[1] Business Standard, “MFIs caught between RBI and AP Govt norms”, http://www.business-standard.com/india/news/mfis-caught-between-rbiap-govt-norms/134386/on
Microfinance Paper Wrap-Up, May 10, 2011, “Microfinance in India – A Crisis at the Bottom of the Pyramid; Published by Legatum Ventures”, https://www.microcapital.org/microfinance-paper-wrap-up-microfinance-in-india-a-crisis-at-the-bottom-of-the-pyramid-published-by-legatum-ventures/
MicroCapital.org Brief, May 5, 2011, “Reserve Bank of India (RBI) Enacts Most of Microfinance Guidelines Proposed by Malegam Committee”, https://www.microcapital.org/microcapital-brief-reserve-bank-of-india-rbi-enacts-most-of-microfinance-guidelines-proposed-by-malegam-committee/
MicroCapital.org Brief, March 15, 2011, “Federal Microfinance Bill May Replace Existing State Microfinance Legislation in India”, https://www.microcapital.org/microcapital-brief-federal-microfinance-bill-may-replace-existing-state-microfinance-legislation-in-india/
MicroCapital Universe Profile: Reserve Bank of India, 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/
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