MICROCAPITAL.ORG BRIEF: Reserve Bank of India Publishes Changes to Microfinance Law

The Reserve Bank of India (RBI) publishes a circular which memorializes changes to India’s Micro, Small and Medium Enterprises Development (MSMED) Act of 2006. Last month, RBI published several circulars which detailed changes to several aspects of MSMED Act. The first change is that rural loans granted by India’s Regional Rural Banks (RRBs) are subject to the MSMED Act and its priority treatment of microfinance industry. The second change incorporates the provision of credit to MFIs for the “investment in plant and machinery.” The final change is that loans granted by RRBs for “retail trade” are subject to MSMED Act. The MSMED Act provides for special treatment of MFIs with the goal of promoting, developing and enhancing competition in the microfinance industry.

About RBI:

Reserve Bank of India established in 1935 undertakes consolidated supervision of the financial sector comprising commercial banks, financial institutions and non-banking finance companies. The current focus of RBI is to supervise financial institutions, consolidate accounting standards, resolve legal issues in banking fraud, assess the divergence non-performing assets and supervise the rating model for banking sector. RBI consists of twenty-two regional offices. RBI website: http://www.rbi.org.in/scripts/AboutusDisplay.aspx#MF

Bibliography:
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Reserve+Bank+of+India+%28RBI%29

Source:

(1) Micro, Small and Medium Enterprises Development Act of 2006: http://www.and.nic.in/C_charter/indust/msmeact2006.pdf

(2) Regulatory and Other Measures of October 2009, Reserve Bank of India website: http://www.rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=10702