India’s finance ministry reportedly has cleared the draft of a microfinance bill following its public circulation for comments in July 2011 [1].The finance ministry has sent the draft to the law ministry for approval and is planning for the bill to be considered in the budget session of Parliament scheduled for mid-March [2]. The proposed legislation, which was covered in an August 2011 MicroCapital article, identifies the Reserve Bank of India as the sole regulator for the microfinance sector in the country, mooting state legislation such has been in effect in Andhra Pradesh since 2010 [3]. The bill is intended to help restore investor confidence in the sector [1].
In other news, the Indian government reportedly has drafted a plan to utilize India’s 155,000 post offices as banks, in an effort to support financial inclusion goals. A proposal has been sent to the finance ministry for approval and is expected to be implemented within the year. The proposal has the potential to significantly increase the coverage of the country’s banking network, particularly in the rural areas where 90 percent of post office branches are located [4]. The plan will add banking services such as loans and cheque facilities to India Post’s existing services, which include savings schemes which have reached a total outstanding balance of about INR 600,000 crore (USD 117 billion) [5].
By Kristha Abores, 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 (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.
Sources and Additional Resources:
[1] LiveMint: “Finance ministry clears proposed national microfinance law,” http://www.livemint.com/2012/01/22225124/Finance-ministry-clears-propos….
[2] Business Today: “Budget 2012-13: Govt may introduce microfinance Bill,” http://businesstoday.intoday.in/story/budget-2012-13-microfinance-bill/1…
[3] MicroCapital Article, August 15, 2011, “MICROCAPITAL BRIEF: Indian Government Publishes Draft of Microfinance Institutions Bill, Would Make Reserve Bank of India (RBI) Sole Regulator, Establish Microfinance Development Council, Microfinance Development Fund,” https://www.microcapital.org/microcapital-brief-indian-government-publish…
[4] The Economic Times: “Eyes set on Post Office banks and liberalisation of sector,” http://articles.economictimes.indiatimes.com/2012-01-03/news/30584829_1_…
[5] The Hindu Business Line: “Banking on India Post,” http://www.thehindubusinessline.com/opinion/editorial/article2863226.ece
MicroCapital.org article, October 25, 2011, “MICROCAPITAL BRIEF: Indian Finance Ministry Proposes Microfinance Bill Allowing Deposit-Taking, Reserve Bank of India Opposed,” https://www.microcapital.org/microcapital-brief-indian-finance-ministry-p…
MicroCapital.org article, June 11, 2011: “MICROCAPITAL BRIEF: New Draft Bill From Ministry of Finance Would Expand Role of Reserve Bank of India (RBI) to Regulate Entire Indian Microfinance Sector, Cutting Roles of NABARD, State Governments”, https://www.microcapital.org/microcapital-brief-new-draft-bill-from-minis…
MicroCapital.org article, March 15, 2011, “MICROCAPITAL BRIEF: Federal Microfinance Bill May Replace Existing State Microfinance Legislation in India,” https://www.microcapital.org/microcapital-brief-federal-microfinance-bill…
MicroCapital Universe Profile: Reserve Bank of India (RBI), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Res…
Browse the MicroCapital Universe and add your entry to the wiki at: https://www.microcapital.org/microfinanceuniverse/
Similar Posts:
- MICROFINANCE PAPER WRAP-UP: “Microfinance in India: Issues, Challenges and Opportunities;” by Mohammad Abu Saleh, Zubair Ahmad
- MICROFINANCE EVENT: Sa-Dhan National Conference on Inclusive Growth; November 8-9, 2023; New Delhi, India
- MICROFINANCE EVENT: Global SME Finance Forum; September 12-14, 2023; Mumbai, India
- MICROCAPITAL BRIEF: Vanuatu Launches Vanklia System to Automate Large, Small Payments
- MICROCAPITAL BRIEF: UNCDF, Bill & Melinda Gates Foundation Launch Mobile Money Program in Ethiopia
