The finance ministry in India is drafting a Microfinance Institutions (Development and Regulation) Bill which will allow microfinance institutions (MFIs) in India to collect deposits from self-help groups (SHGs) and SHG members. The Reserve Bank of India (RBI), India’s central banking authority, has reportedly expressed concern about the safety of the money deposited, indicating that: “it will not allow thrift to anyone other than NBFCs (non-banking financial companies).” [1] For-profit MFIs in India generally operate as NBFCs while nonprofit MFIs do not.
An unnamed finance ministry official has been quoted as saying, “as part of our discussion with RBI, we have told them that if you have concerns over thrift, then you can address it as part of the regulations that will be framed.” [1]
By Cameron Milani, Research Associate
About the Reserve Bank of India: 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, “RBI Against Letting MFIs Collect Small Deposits,” http://www.livemint.com/2011/10/18190834/RBI-against-letting-MFIs-colle….
MicroCapital.org, 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/page/2/?s=Microfinance+Institutions+Bill+Ind…
MicroCapital Universe, Reserve Bank of India: 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/
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