The Union Cabinet of India, a decision-making body of the executive branch of the government of India, reportedly has approved a bill proposing that all microfinance institutions (MFIs) register with the Reserve Bank of India (RBI) and maintain a minimum of funds equal to INR 5 lakh (USD 9,270). The bill also proposes a microfinance council that would advise the government on policies for the industry. The bill was drafted in response to the downturn in the microfinance sector that began in the Indian state of Andhra Pradesh in 2010. The next step for the bill is that it will be presented to parliament for consideration. As MicroCapital reported in March, plans to propose the bill during the current parliamentary session were made public by Finance Finance Minister Pranab Mukherjee.
For the year 2010, 93 microfinance institutions (MFIs) in India report to the US-based nonprofit Microfinance Information Exchange (MIX) an aggregate gross loan portfolio of USD 5.2 billion outstanding to approximately 31.7 million borrowers and total aggregate deposits of USD 300 million.
By Brendan Millan, Research Associate
About Union Cabinet of India: Formed in 2009, the Union Cabinet of India (officially known as the Union Council of Ministers of India) is a decision-making body of the executive branch of the government of India and is composed of the prime minister and 35 cabinet ministers. It is the most senior of the government ministries.
About the 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 Resources:
[1] The Financial Express: “Cabinet Clears Microfinance Bill”, http://www.financialexpress.com/news/cabinet-clears-micro-finance-bill/9…
MicroCapital.org story, April 12, 2012, “MICROCAPITAL BRIEF: Reserve Bank of India (RBI) Imposes Requirements on Communications with Microfinance”, https://www.microcapital.org/microcapital-brief-reserve-bank-of-india-rbi…
MicroCapital story, April 4, 2012, “MICROCAPITAL BRIEF: Indian Microfinance Sector Cautious on Branch Expansion, Hiring”, https://www.microcapital.org/microcapital-brief-indian-microfinance-secto…
MicroCapital.org story, March 28, 2012, “MICROCAPITAL BRIEF: Draft Microfinance Institution Bill in India to Moot Local Regulations, Allow RBI to Set Rate Cap, Establish Advisory Councils, Microfinance Development Fund”, https://www.microcapital.org/microcapital-brief-draft-microfinance-instit…
MicroCapital story, March 27, 2012, “MICROCAPITAL BRIEF: 9.2m Microfinance Borrowers in India Have Defaulted Since 2010”, https://www.microcapital.org/microcapital-brief-9-2m-microfinance-borrowe…
MicroCapital story, February 28, 2012, “MICROCAPITAL BRIEF: 76 Criminal Cases Pending Over Alleged Role of Microlenders in Borrower Suicides in India’s Andhra Pradesh”, https://www.microcapital.org/microcapital-brief-76-criminal-cases-pending…
MicroCapital story, November 15, 2010, “MICROCAPITAL BRIEF: 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-indus…
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/
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