The Indian rating agency Credit Rating and Information Services of India Limited (CRISIL) has announced that it expects, “Growth prospects for microfinance institutions (MFIs) will remain subdued over the medium term,” due to microfinance guidelines issued earlier this month by the Reserve Bank of India (RBI), the nation’s central banking authority. Consistent with her statements covered in January by MicroCapital, Ms Rupali Shanker, head of the financial sector ratings department at CRISIL, suggests that, “proposed regulatory restrictions on multiple lending, loan size, and usage of loans…will provide an impetus for consolidation in the sector.” Ms Shanker also expects “RBI’s recent guidelines to enable resumption of bank funding to MFIs.”
CRISIL further finds that regulatory jurisdiction remains unclear as state governments have also enacted legislation for the microfinance sector such as in Andhra Pradesh. Mr Pawan Agrawal, director of the corporate ratings department at CRISIL, argues that, “A clearer regulatory framework will remain critical to instill greater confidence in the sector.”
By Jacqueline Foelster, Research Associate
About Credit Rating and Information Services of India Limited (CRISIL): Founded in 1987, CRISIL is an Indian ratings, research, risk and policy advisory company that is based in Bangalore, India. It provides ratings for microfinance institutions (MFIs), including approximately 30 that report to the US-based, nonprofit Microfinance Information Exchange as of May 2011. Its offerings also include research on India’s economy, investment research outsourcing, fund services, risk management and infrastructure advisory services. CRISIL is majority-held by Standard & Poor’s, a US-based credit rating agency.
Source and Additional Resources:
[1] Credit Rating and Information Services of India Ltd. (CRISIL), Press Release, “Subdued growth may trigger consolidation for MFIs: CRISIL”, http://www.crisil.com/Ratings/Brochureware/News/CRISIL-Ratings_subdued-growth-mfi-pr_090511.pdf
MicroCapital.org Brief, January 27, 2011, “Indian Rating Agencies, ICRA and Credit Rating and Information Services of India Limited (CRISIL), Predict Microfinance Institution (MFI) Consolidation Would Result From Reserve Bank of India (RBI) Proposals”, https://www.microcapital.org/microcapital-brief-indian-rating-agencies-icra-and-credit-rating-and-information-services-of-india-limited-crisil-predict-microfinance-institution-mfi-consolidation-would-result-from-reserve-ba/
MicroCapital.org Brief, November 15, 2010: India’s Microfinance Industry on Brink of “Collapse” Due to Credit Freeze in State of Andhra Pradesh, https://www.microcapital.org/microcapital-brief-indias-microfinance-industry-on-brink-of-collapse-due-to-credit-freeze-in-state-of-andhra-pradesh/
MicroCapital Universe Profile: Credit Rating and Information Services of India Ltd. (CRISIL), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Credit+Rating+and+Information+Services+of+India+Ltd.+%28CRISIL
Browse the MicroCapital Universe and add your entry to the wiki at https://www.microcapital.org/microfinanceuniverse/
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