Deprecated (16384): The ArrayAccess methods will be removed in 4.0.0.Use getParam(), getData() and getQuery() instead. - /home/brlfuser/public_html/src/Controller/ArtileDetailController.php, line: 73
 You can disable deprecation warnings by setting `Error.errorLevel` to `E_ALL & ~E_USER_DEPRECATED` in your config/app.php. [CORE/src/Core/functions.php, line 311]
Code Context


        trigger_error($message, E_USER_DEPRECATED);

    }
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 You can disable deprecation warnings by setting `Error.errorLevel` to `E_ALL & ~E_USER_DEPRECATED` in your config/app.php.'
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deprecationWarning - CORE/src/Core/functions.php, line 311
Cake\Http\ServerRequest::offsetGet() - CORE/src/Http/ServerRequest.php, line 2421
App\Controller\ArtileDetailController::printArticle() - APP/Controller/ArtileDetailController.php, line 73
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Cake\Http\ActionDispatcher::_invoke() - CORE/src/Http/ActionDispatcher.php, line 120
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Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
Cake\Error\Middleware\ErrorHandlerMiddleware::__invoke() - CORE/src/Error/Middleware/ErrorHandlerMiddleware.php, line 96
Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
Cake\Http\Runner::run() - CORE/src/Http/Runner.php, line 51
Cake\Http\Server::run() - CORE/src/Http/Server.php, line 98

Deprecated (16384): The ArrayAccess methods will be removed in 4.0.0.Use getParam(), getData() and getQuery() instead. - /home/brlfuser/public_html/src/Controller/ArtileDetailController.php, line: 74
 You can disable deprecation warnings by setting `Error.errorLevel` to `E_ALL & ~E_USER_DEPRECATED` in your config/app.php. [CORE/src/Core/functions.php, line 311]
Code Context


        trigger_error($message, E_USER_DEPRECATED);

    }
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 You can disable deprecation warnings by setting `Error.errorLevel` to `E_ALL & ~E_USER_DEPRECATED` in your config/app.php.'
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deprecationWarning - CORE/src/Core/functions.php, line 311
Cake\Http\ServerRequest::offsetGet() - CORE/src/Http/ServerRequest.php, line 2421
App\Controller\ArtileDetailController::printArticle() - APP/Controller/ArtileDetailController.php, line 74
Cake\Controller\Controller::invokeAction() - CORE/src/Controller/Controller.php, line 610
Cake\Http\ActionDispatcher::_invoke() - CORE/src/Http/ActionDispatcher.php, line 120
Cake\Http\ActionDispatcher::dispatch() - CORE/src/Http/ActionDispatcher.php, line 94
Cake\Http\BaseApplication::__invoke() - CORE/src/Http/BaseApplication.php, line 235
Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
Cake\Routing\Middleware\RoutingMiddleware::__invoke() - CORE/src/Routing/Middleware/RoutingMiddleware.php, line 162
Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
Cake\Routing\Middleware\AssetMiddleware::__invoke() - CORE/src/Routing/Middleware/AssetMiddleware.php, line 88
Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
Cake\Error\Middleware\ErrorHandlerMiddleware::__invoke() - CORE/src/Error/Middleware/ErrorHandlerMiddleware.php, line 96
Cake\Http\Runner::__invoke() - CORE/src/Http/Runner.php, line 65
Cake\Http\Runner::run() - CORE/src/Http/Runner.php, line 51
Cake\Http\Server::run() - CORE/src/Http/Server.php, line 98

Warning (512): Unable to emit headers. Headers sent in file=/home/brlfuser/public_html/vendor/cakephp/cakephp/src/Error/Debugger.php line=853 [CORE/src/Http/ResponseEmitter.php, line 48]
Code Context
            if (Configure::read('debug')) {

                trigger_error($message, E_USER_WARNING);

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&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;Yaga Venugopal Reddy , former Reserve Bank of India governor credited with saving the nation&amp;rsquo;s financial system from the 2008 meltdown, has said what many finance experts believed, but did not have the courage to admit publicly: microfinance is India&amp;rsquo;s subprime.&lt;/font&gt;&lt;br /&gt;
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&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;&amp;ldquo;Ultimately, it&amp;rsquo;s something like subprime lending,&amp;rdquo; Mr Reddy told ET in an interview ahead of his book release. &amp;ldquo;The same incentives are operating here... it was securitisation and derivatives that operated in the US. Here it is the priority sector lending by banks.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;
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&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;Subprime lending refers to loans extended to people with poor repaying ability that ultimately led to defaults.&lt;/font&gt;&lt;br /&gt;
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&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;The Rs 25,000-crore microfinance industry is facing tumultuous times ever since the biggest, SKS Microfinance, created a controversy two months ago by sacking chief executive Suresh Gurumani.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;There was a confluence of woes for the sector when the Andhra Pradesh government came up with legislation curbing their operations. Banks pulled back on lending as some of the institutions were behaving more like moneylenders and in some cases drove borrowers to suicide.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;Indian banks such as SBI , ICICI Bank and Axis Bank are estimated to have lent Rs 16,000 crore to micro lenders. ICICI&amp;rsquo;s lending is at Rs 2,000 crore, SBI&amp;rsquo;s at more than Rs 1,000 crore and Sidbi&amp;rsquo;s at Rs 4,000 crore, according to data from rating company Care.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;The financial magnitude may not be the same with the Indian microfinance industry being tiny compared with the subprime lending crisis that led to more than a trillion dollars of losses and sank many venerable institutions.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;But there are similarities such as opaque practices, high salaries and commissions inducing unethical business, and leverage.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;The current practices may create systemic problems too, unlike moneylenders who operate with their own money.&lt;/font&gt;&lt;br /&gt;
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&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;&amp;ldquo;If it is profit and if there is lending, aggressively, then it&amp;rsquo;s just moneylending,&amp;rdquo; said Mr Reddy, who was criticised before the credit crisis for his conservative approach to policymaking.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;&amp;ldquo;Also, if you look at it, the resource is leveraged, it&amp;rsquo;s not just moneylending business. The moneylender normally lends out his own money, whereas here the MFI is actually borrowing money from depositors and lending the money. So essentially, he is a moneylender, but a leveraged moneylender.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;Many admit to the fact that the industry has gone astray with the lure of superlative returns as private equity investors such as Sequoia Capital smelt an opportunity. But that did not mean that its role in financial inclusion could be discarded.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;&amp;ldquo;Yes, I agree with Mr Reddy when he says a lot of perverse incentives got aligned,&amp;rdquo; said Vijay Mahajan, chairman of BASIX, a micro lender, and head of Microfinance Institutions Network. &amp;ldquo;Here perverse incentives got aligned like in the US and in two years the sector went from helping the poor to preying on the poor.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;These institutions are no more the not-for-profit ones as envisioned by Nobel Laureate Mohammed Yunus, so regulations are essential, says Reddy. Bangladesh-born Yunus had seen micro lending as a vehicle to lift people out of poverty rather than enhance returns of wealthy investors in private equity funds.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;&amp;ldquo;The idea that MFIs should be treated like banks but given soft regulations is dangerous,&amp;rdquo; said Mr Reddy. &amp;ldquo;We had a somewhat similar experience with urban co-operative banks.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;em&gt;&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;(With inputs from Ruchira Roy in Mumbai)&lt;/font&gt;&lt;br /&gt;
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		&#039;credit_writer&#039; =&gt; &#039;The Economic Times, 23 November, 2010, http://economictimes.indiatimes.com/news/economy/indicators/Microfinance-in-India-is-like-subprime-lending-Y-V-Reddy/articleshow/6972903.cms&#039;,
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Yaga Venugopal Reddy , former Reserve Bank of India governor credited with saving the nation&amp;rsquo;s financial system from the 2008 meltdown, has said what many finance experts believed, but did not have the courage to admit publicly: microfinance is India&amp;rsquo;s...&#039;,
	&#039;disp&#039; =&gt; &#039;&lt;font &gt;&lt;br /&gt;&lt;/font&gt;&lt;div align=&quot;justify&quot;&gt;&lt;font &gt;Yaga Venugopal Reddy , former Reserve Bank of India governor credited with saving the nation&amp;rsquo;s financial system from the 2008 meltdown, has said what many finance experts believed, but did not have the courage to admit publicly: microfinance is India&amp;rsquo;s subprime.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;&amp;ldquo;Ultimately, it&amp;rsquo;s something like subprime lending,&amp;rdquo; Mr Reddy told ET in an interview ahead of his book release. &amp;ldquo;The same incentives are operating here... it was securitisation and derivatives that operated in the US. Here it is the priority sector lending by banks.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;Subprime lending refers to loans extended to people with poor repaying ability that ultimately led to defaults.&lt;/font&gt;&lt;br /&gt;&lt;font &gt;&lt;/font&gt;&lt;/div&gt;&lt;div align=&quot;justify&quot;&gt;&amp;nbsp;&lt;/div&gt;&lt;div align=&quot;justify&quot;&gt;&lt;font &gt;The Rs 25,000-crore microfinance industry is facing tumultuous times ever since the biggest, SKS Microfinance, created a controversy two months ago by sacking chief executive Suresh Gurumani.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;There was a confluence of woes for the sector when the Andhra Pradesh government came up with legislation curbing their operations. Banks pulled back on lending as some of the institutions were behaving more like moneylenders and in some cases drove borrowers to suicide.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;Indian banks such as SBI , ICICI Bank and Axis Bank are estimated to have lent Rs 16,000 crore to micro lenders. ICICI&amp;rsquo;s lending is at Rs 2,000 crore, SBI&amp;rsquo;s at more than Rs 1,000 crore and Sidbi&amp;rsquo;s at Rs 4,000 crore, according to data from rating company Care.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;The financial magnitude may not be the same with the Indian microfinance industry being tiny compared with the subprime lending crisis that led to more than a trillion dollars of losses and sank many venerable institutions.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;But there are similarities such as opaque practices, high salaries and commissions inducing unethical business, and leverage.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;The current practices may create systemic problems too, unlike moneylenders who operate with their own money.&lt;/font&gt;&lt;br /&gt;&lt;font &gt;&lt;/font&gt;&lt;/div&gt;&lt;div align=&quot;justify&quot;&gt;&amp;nbsp;&lt;/div&gt;&lt;div align=&quot;justify&quot;&gt;&lt;font &gt;&amp;ldquo;If it is profit and if there is lending, aggressively, then it&amp;rsquo;s just moneylending,&amp;rdquo; said Mr Reddy, who was criticised before the credit crisis for his conservative approach to policymaking.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;&amp;ldquo;Also, if you look at it, the resource is leveraged, it&amp;rsquo;s not just moneylending business. The moneylender normally lends out his own money, whereas here the MFI is actually borrowing money from depositors and lending the money. So essentially, he is a moneylender, but a leveraged moneylender.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;Many admit to the fact that the industry has gone astray with the lure of superlative returns as private equity investors such as Sequoia Capital smelt an opportunity. But that did not mean that its role in financial inclusion could be discarded.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;&amp;ldquo;Yes, I agree with Mr Reddy when he says a lot of perverse incentives got aligned,&amp;rdquo; said Vijay Mahajan, chairman of BASIX, a micro lender, and head of Microfinance Institutions Network. &amp;ldquo;Here perverse incentives got aligned like in the US and in two years the sector went from helping the poor to preying on the poor.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;These institutions are no more the not-for-profit ones as envisioned by Nobel Laureate Mohammed Yunus, so regulations are essential, says Reddy. Bangladesh-born Yunus had seen micro lending as a vehicle to lift people out of poverty rather than enhance returns of wealthy investors in private equity funds.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;&amp;ldquo;The idea that MFIs should be treated like banks but given soft regulations is dangerous,&amp;rdquo; said Mr Reddy. &amp;ldquo;We had a somewhat similar experience with urban co-operative banks.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;em&gt;&lt;font &gt;(With inputs from Ruchira Roy in Mumbai)&lt;/font&gt;&lt;br /&gt;&lt;/em&gt;&lt;br /&gt;&lt;/div&gt;&#039;,
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&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;Yaga Venugopal Reddy , former Reserve Bank of India governor credited with saving the nation&amp;rsquo;s financial system from the 2008 meltdown, has said what many finance experts believed, but did not have the courage to admit publicly: microfinance is India&amp;rsquo;s subprime.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;&amp;ldquo;Ultimately, it&amp;rsquo;s something like subprime lending,&amp;rdquo; Mr Reddy told ET in an interview ahead of his book release. &amp;ldquo;The same incentives are operating here... it was securitisation and derivatives that operated in the US. Here it is the priority sector lending by banks.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;Subprime lending refers to loans extended to people with poor repaying ability that ultimately led to defaults.&lt;/font&gt;&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;&lt;/font&gt;
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&amp;nbsp;
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&lt;div align=&quot;justify&quot;&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;The Rs 25,000-crore microfinance industry is facing tumultuous times ever since the biggest, SKS Microfinance, created a controversy two months ago by sacking chief executive Suresh Gurumani.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;There was a confluence of woes for the sector when the Andhra Pradesh government came up with legislation curbing their operations. Banks pulled back on lending as some of the institutions were behaving more like moneylenders and in some cases drove borrowers to suicide.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;Indian banks such as SBI , ICICI Bank and Axis Bank are estimated to have lent Rs 16,000 crore to micro lenders. ICICI&amp;rsquo;s lending is at Rs 2,000 crore, SBI&amp;rsquo;s at more than Rs 1,000 crore and Sidbi&amp;rsquo;s at Rs 4,000 crore, according to data from rating company Care.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;The financial magnitude may not be the same with the Indian microfinance industry being tiny compared with the subprime lending crisis that led to more than a trillion dollars of losses and sank many venerable institutions.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;But there are similarities such as opaque practices, high salaries and commissions inducing unethical business, and leverage.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;The current practices may create systemic problems too, unlike moneylenders who operate with their own money.&lt;/font&gt;&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;&lt;/font&gt;
&lt;/div&gt;
&lt;div align=&quot;justify&quot;&gt;
&amp;nbsp;
&lt;/div&gt;
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&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;&amp;ldquo;If it is profit and if there is lending, aggressively, then it&amp;rsquo;s just moneylending,&amp;rdquo; said Mr Reddy, who was criticised before the credit crisis for his conservative approach to policymaking.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;&amp;ldquo;Also, if you look at it, the resource is leveraged, it&amp;rsquo;s not just moneylending business. The moneylender normally lends out his own money, whereas here the MFI is actually borrowing money from depositors and lending the money. So essentially, he is a moneylender, but a leveraged moneylender.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;Many admit to the fact that the industry has gone astray with the lure of superlative returns as private equity investors such as Sequoia Capital smelt an opportunity. But that did not mean that its role in financial inclusion could be discarded.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;&amp;ldquo;Yes, I agree with Mr Reddy when he says a lot of perverse incentives got aligned,&amp;rdquo; said Vijay Mahajan, chairman of BASIX, a micro lender, and head of Microfinance Institutions Network. &amp;ldquo;Here perverse incentives got aligned like in the US and in two years the sector went from helping the poor to preying on the poor.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;These institutions are no more the not-for-profit ones as envisioned by Nobel Laureate Mohammed Yunus, so regulations are essential, says Reddy. Bangladesh-born Yunus had seen micro lending as a vehicle to lift people out of poverty rather than enhance returns of wealthy investors in private equity funds.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;&amp;ldquo;The idea that MFIs should be treated like banks but given soft regulations is dangerous,&amp;rdquo; said Mr Reddy. &amp;ldquo;We had a somewhat similar experience with urban co-operative banks.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;em&gt;&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;(With inputs from Ruchira Roy in Mumbai)&lt;/font&gt;&lt;br /&gt;
&lt;/em&gt;&lt;br /&gt;
&lt;/div&gt;&#039;,
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Yaga Venugopal Reddy , former Reserve Bank of India governor credited with saving the nation&amp;rsquo;s financial system from the 2008 meltdown, has said what many finance experts believed, but did not have the courage to admit publicly: microfinance is India&amp;rsquo;s...&#039;
$disp = &#039;&lt;font &gt;&lt;br /&gt;&lt;/font&gt;&lt;div align=&quot;justify&quot;&gt;&lt;font &gt;Yaga Venugopal Reddy , former Reserve Bank of India governor credited with saving the nation&amp;rsquo;s financial system from the 2008 meltdown, has said what many finance experts believed, but did not have the courage to admit publicly: microfinance is India&amp;rsquo;s subprime.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;&amp;ldquo;Ultimately, it&amp;rsquo;s something like subprime lending,&amp;rdquo; Mr Reddy told ET in an interview ahead of his book release. &amp;ldquo;The same incentives are operating here... it was securitisation and derivatives that operated in the US. Here it is the priority sector lending by banks.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;Subprime lending refers to loans extended to people with poor repaying ability that ultimately led to defaults.&lt;/font&gt;&lt;br /&gt;&lt;font &gt;&lt;/font&gt;&lt;/div&gt;&lt;div align=&quot;justify&quot;&gt;&amp;nbsp;&lt;/div&gt;&lt;div align=&quot;justify&quot;&gt;&lt;font &gt;The Rs 25,000-crore microfinance industry is facing tumultuous times ever since the biggest, SKS Microfinance, created a controversy two months ago by sacking chief executive Suresh Gurumani.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;There was a confluence of woes for the sector when the Andhra Pradesh government came up with legislation curbing their operations. Banks pulled back on lending as some of the institutions were behaving more like moneylenders and in some cases drove borrowers to suicide.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;Indian banks such as SBI , ICICI Bank and Axis Bank are estimated to have lent Rs 16,000 crore to micro lenders. ICICI&amp;rsquo;s lending is at Rs 2,000 crore, SBI&amp;rsquo;s at more than Rs 1,000 crore and Sidbi&amp;rsquo;s at Rs 4,000 crore, according to data from rating company Care.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;The financial magnitude may not be the same with the Indian microfinance industry being tiny compared with the subprime lending crisis that led to more than a trillion dollars of losses and sank many venerable institutions.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;But there are similarities such as opaque practices, high salaries and commissions inducing unethical business, and leverage.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;The current practices may create systemic problems too, unlike moneylenders who operate with their own money.&lt;/font&gt;&lt;br /&gt;&lt;font &gt;&lt;/font&gt;&lt;/div&gt;&lt;div align=&quot;justify&quot;&gt;&amp;nbsp;&lt;/div&gt;&lt;div align=&quot;justify&quot;&gt;&lt;font &gt;&amp;ldquo;If it is profit and if there is lending, aggressively, then it&amp;rsquo;s just moneylending,&amp;rdquo; said Mr Reddy, who was criticised before the credit crisis for his conservative approach to policymaking.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;&amp;ldquo;Also, if you look at it, the resource is leveraged, it&amp;rsquo;s not just moneylending business. The moneylender normally lends out his own money, whereas here the MFI is actually borrowing money from depositors and lending the money. So essentially, he is a moneylender, but a leveraged moneylender.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;Many admit to the fact that the industry has gone astray with the lure of superlative returns as private equity investors such as Sequoia Capital smelt an opportunity. But that did not mean that its role in financial inclusion could be discarded.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;&amp;ldquo;Yes, I agree with Mr Reddy when he says a lot of perverse incentives got aligned,&amp;rdquo; said Vijay Mahajan, chairman of BASIX, a micro lender, and head of Microfinance Institutions Network. &amp;ldquo;Here perverse incentives got aligned like in the US and in two years the sector went from helping the poor to preying on the poor.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;These institutions are no more the not-for-profit ones as envisioned by Nobel Laureate Mohammed Yunus, so regulations are essential, says Reddy. Bangladesh-born Yunus had seen micro lending as a vehicle to lift people out of poverty rather than enhance returns of wealthy investors in private equity funds.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;&amp;ldquo;The idea that MFIs should be treated like banks but given soft regulations is dangerous,&amp;rdquo; said Mr Reddy. &amp;ldquo;We had a somewhat similar experience with urban co-operative banks.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;em&gt;&lt;font &gt;(With inputs from Ruchira Roy in Mumbai)&lt;/font&gt;&lt;br /&gt;&lt;/em&gt;&lt;br /&gt;&lt;/div&gt;&#039;
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Yaga Venugopal Reddy , former Reserve Bank of India governor credited with saving the nation&rsquo;s financial system from the 2008 meltdown, has said what many finance experts believed, but did not have the courage to admit publicly: microfinance is India&rsquo;s..."/>
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                <strong>MFIs similar to moneylenders, says Reddy by Gayatri Nayak</strong></h1>
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                <font ><br /></font><div align="justify"><font >Yaga Venugopal Reddy , former Reserve Bank of India governor credited with saving the nation&rsquo;s financial system from the 2008 meltdown, has said what many finance experts believed, but did not have the courage to admit publicly: microfinance is India&rsquo;s subprime.</font><br /><br /><font >&ldquo;Ultimately, it&rsquo;s something like subprime lending,&rdquo; Mr Reddy told ET in an interview ahead of his book release. &ldquo;The same incentives are operating here... it was securitisation and derivatives that operated in the US. Here it is the priority sector lending by banks.&rdquo;</font><br /><br /><font >Subprime lending refers to loans extended to people with poor repaying ability that ultimately led to defaults.</font><br /><font ></font></div><div align="justify">&nbsp;</div><div align="justify"><font >The Rs 25,000-crore microfinance industry is facing tumultuous times ever since the biggest, SKS Microfinance, created a controversy two months ago by sacking chief executive Suresh Gurumani.</font><br /><br /><font >There was a confluence of woes for the sector when the Andhra Pradesh government came up with legislation curbing their operations. Banks pulled back on lending as some of the institutions were behaving more like moneylenders and in some cases drove borrowers to suicide.</font><br /><br /><font >Indian banks such as SBI , ICICI Bank and Axis Bank are estimated to have lent Rs 16,000 crore to micro lenders. ICICI&rsquo;s lending is at Rs 2,000 crore, SBI&rsquo;s at more than Rs 1,000 crore and Sidbi&rsquo;s at Rs 4,000 crore, according to data from rating company Care.</font><br /><br /><font >The financial magnitude may not be the same with the Indian microfinance industry being tiny compared with the subprime lending crisis that led to more than a trillion dollars of losses and sank many venerable institutions.</font><br /><br /><font >But there are similarities such as opaque practices, high salaries and commissions inducing unethical business, and leverage.</font><br /><br /><font >The current practices may create systemic problems too, unlike moneylenders who operate with their own money.</font><br /><font ></font></div><div align="justify">&nbsp;</div><div align="justify"><font >&ldquo;If it is profit and if there is lending, aggressively, then it&rsquo;s just moneylending,&rdquo; said Mr Reddy, who was criticised before the credit crisis for his conservative approach to policymaking.</font><br /><br /><font >&ldquo;Also, if you look at it, the resource is leveraged, it&rsquo;s not just moneylending business. The moneylender normally lends out his own money, whereas here the MFI is actually borrowing money from depositors and lending the money. So essentially, he is a moneylender, but a leveraged moneylender.&rdquo;</font><br /><br /><font >Many admit to the fact that the industry has gone astray with the lure of superlative returns as private equity investors such as Sequoia Capital smelt an opportunity. But that did not mean that its role in financial inclusion could be discarded.</font><br /><br /><font >&ldquo;Yes, I agree with Mr Reddy when he says a lot of perverse incentives got aligned,&rdquo; said Vijay Mahajan, chairman of BASIX, a micro lender, and head of Microfinance Institutions Network. &ldquo;Here perverse incentives got aligned like in the US and in two years the sector went from helping the poor to preying on the poor.&rdquo;</font><br /><br /><font >These institutions are no more the not-for-profit ones as envisioned by Nobel Laureate Mohammed Yunus, so regulations are essential, says Reddy. Bangladesh-born Yunus had seen micro lending as a vehicle to lift people out of poverty rather than enhance returns of wealthy investors in private equity funds.</font><br /><br /><font >&ldquo;The idea that MFIs should be treated like banks but given soft regulations is dangerous,&rdquo; said Mr Reddy. &ldquo;We had a somewhat similar experience with urban co-operative banks.&rdquo;</font><br /><br /><em><font >(With inputs from Ruchira Roy in Mumbai)</font><br /></em><br /></div>               </font>
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    <link rel="canonical" href="https://im4change.in/<pre class="cake-error"><a href="javascript:void(0);" onclick="document.getElementById('cakeErr67f3d9056f9ed-trace').style.display = (document.getElementById('cakeErr67f3d9056f9ed-trace').style.display == 'none' ? '' : 'none');"><b>Notice</b> (8)</a>: Undefined variable: urlPrefix [<b>APP/Template/Layout/printlayout.ctp</b>, line <b>8</b>]<div id="cakeErr67f3d9056f9ed-trace" class="cake-stack-trace" style="display: none;"><a href="javascript:void(0);" onclick="document.getElementById('cakeErr67f3d9056f9ed-code').style.display = (document.getElementById('cakeErr67f3d9056f9ed-code').style.display == 'none' ? '' : 'none')">Code</a> <a href="javascript:void(0);" onclick="document.getElementById('cakeErr67f3d9056f9ed-context').style.display = (document.getElementById('cakeErr67f3d9056f9ed-context').style.display == 'none' ? '' : 'none')">Context</a><pre id="cakeErr67f3d9056f9ed-code" class="cake-code-dump" style="display: none;"><code><span style="color: #000000"><span style="color: #0000BB"></span><span style="color: #007700">&lt;</span><span style="color: #0000BB">head</span><span style="color: #007700">&gt;
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&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;Yaga Venugopal Reddy , former Reserve Bank of India governor credited with saving the nation&amp;rsquo;s financial system from the 2008 meltdown, has said what many finance experts believed, but did not have the courage to admit publicly: microfinance is India&amp;rsquo;s subprime.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;&amp;ldquo;Ultimately, it&amp;rsquo;s something like subprime lending,&amp;rdquo; Mr Reddy told ET in an interview ahead of his book release. &amp;ldquo;The same incentives are operating here... it was securitisation and derivatives that operated in the US. Here it is the priority sector lending by banks.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;
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&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;Subprime lending refers to loans extended to people with poor repaying ability that ultimately led to defaults.&lt;/font&gt;&lt;br /&gt;
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&amp;nbsp;
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&lt;div align=&quot;justify&quot;&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;The Rs 25,000-crore microfinance industry is facing tumultuous times ever since the biggest, SKS Microfinance, created a controversy two months ago by sacking chief executive Suresh Gurumani.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;There was a confluence of woes for the sector when the Andhra Pradesh government came up with legislation curbing their operations. Banks pulled back on lending as some of the institutions were behaving more like moneylenders and in some cases drove borrowers to suicide.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;Indian banks such as SBI , ICICI Bank and Axis Bank are estimated to have lent Rs 16,000 crore to micro lenders. ICICI&amp;rsquo;s lending is at Rs 2,000 crore, SBI&amp;rsquo;s at more than Rs 1,000 crore and Sidbi&amp;rsquo;s at Rs 4,000 crore, according to data from rating company Care.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;The financial magnitude may not be the same with the Indian microfinance industry being tiny compared with the subprime lending crisis that led to more than a trillion dollars of losses and sank many venerable institutions.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;But there are similarities such as opaque practices, high salaries and commissions inducing unethical business, and leverage.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;The current practices may create systemic problems too, unlike moneylenders who operate with their own money.&lt;/font&gt;&lt;br /&gt;
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&amp;nbsp;
&lt;/div&gt;
&lt;div align=&quot;justify&quot;&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;&amp;ldquo;If it is profit and if there is lending, aggressively, then it&amp;rsquo;s just moneylending,&amp;rdquo; said Mr Reddy, who was criticised before the credit crisis for his conservative approach to policymaking.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;&amp;ldquo;Also, if you look at it, the resource is leveraged, it&amp;rsquo;s not just moneylending business. The moneylender normally lends out his own money, whereas here the MFI is actually borrowing money from depositors and lending the money. So essentially, he is a moneylender, but a leveraged moneylender.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;
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&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;Many admit to the fact that the industry has gone astray with the lure of superlative returns as private equity investors such as Sequoia Capital smelt an opportunity. But that did not mean that its role in financial inclusion could be discarded.&lt;/font&gt;&lt;br /&gt;
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&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;&amp;ldquo;Yes, I agree with Mr Reddy when he says a lot of perverse incentives got aligned,&amp;rdquo; said Vijay Mahajan, chairman of BASIX, a micro lender, and head of Microfinance Institutions Network. &amp;ldquo;Here perverse incentives got aligned like in the US and in two years the sector went from helping the poor to preying on the poor.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;These institutions are no more the not-for-profit ones as envisioned by Nobel Laureate Mohammed Yunus, so regulations are essential, says Reddy. Bangladesh-born Yunus had seen micro lending as a vehicle to lift people out of poverty rather than enhance returns of wealthy investors in private equity funds.&lt;/font&gt;&lt;br /&gt;
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&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;&amp;ldquo;The idea that MFIs should be treated like banks but given soft regulations is dangerous,&amp;rdquo; said Mr Reddy. &amp;ldquo;We had a somewhat similar experience with urban co-operative banks.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;em&gt;&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;(With inputs from Ruchira Roy in Mumbai)&lt;/font&gt;&lt;br /&gt;
&lt;/em&gt;&lt;br /&gt;
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		&#039;credit_writer&#039; =&gt; &#039;The Economic Times, 23 November, 2010, http://economictimes.indiatimes.com/news/economy/indicators/Microfinance-in-India-is-like-subprime-lending-Y-V-Reddy/articleshow/6972903.cms&#039;,
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Yaga Venugopal Reddy , former Reserve Bank of India governor credited with saving the nation&amp;rsquo;s financial system from the 2008 meltdown, has said what many finance experts believed, but did not have the courage to admit publicly: microfinance is India&amp;rsquo;s...&#039;,
	&#039;disp&#039; =&gt; &#039;&lt;font &gt;&lt;br /&gt;&lt;/font&gt;&lt;div align=&quot;justify&quot;&gt;&lt;font &gt;Yaga Venugopal Reddy , former Reserve Bank of India governor credited with saving the nation&amp;rsquo;s financial system from the 2008 meltdown, has said what many finance experts believed, but did not have the courage to admit publicly: microfinance is India&amp;rsquo;s subprime.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;&amp;ldquo;Ultimately, it&amp;rsquo;s something like subprime lending,&amp;rdquo; Mr Reddy told ET in an interview ahead of his book release. &amp;ldquo;The same incentives are operating here... it was securitisation and derivatives that operated in the US. Here it is the priority sector lending by banks.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;Subprime lending refers to loans extended to people with poor repaying ability that ultimately led to defaults.&lt;/font&gt;&lt;br /&gt;&lt;font &gt;&lt;/font&gt;&lt;/div&gt;&lt;div align=&quot;justify&quot;&gt;&amp;nbsp;&lt;/div&gt;&lt;div align=&quot;justify&quot;&gt;&lt;font &gt;The Rs 25,000-crore microfinance industry is facing tumultuous times ever since the biggest, SKS Microfinance, created a controversy two months ago by sacking chief executive Suresh Gurumani.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;There was a confluence of woes for the sector when the Andhra Pradesh government came up with legislation curbing their operations. Banks pulled back on lending as some of the institutions were behaving more like moneylenders and in some cases drove borrowers to suicide.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;Indian banks such as SBI , ICICI Bank and Axis Bank are estimated to have lent Rs 16,000 crore to micro lenders. ICICI&amp;rsquo;s lending is at Rs 2,000 crore, SBI&amp;rsquo;s at more than Rs 1,000 crore and Sidbi&amp;rsquo;s at Rs 4,000 crore, according to data from rating company Care.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;The financial magnitude may not be the same with the Indian microfinance industry being tiny compared with the subprime lending crisis that led to more than a trillion dollars of losses and sank many venerable institutions.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;But there are similarities such as opaque practices, high salaries and commissions inducing unethical business, and leverage.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;The current practices may create systemic problems too, unlike moneylenders who operate with their own money.&lt;/font&gt;&lt;br /&gt;&lt;font &gt;&lt;/font&gt;&lt;/div&gt;&lt;div align=&quot;justify&quot;&gt;&amp;nbsp;&lt;/div&gt;&lt;div align=&quot;justify&quot;&gt;&lt;font &gt;&amp;ldquo;If it is profit and if there is lending, aggressively, then it&amp;rsquo;s just moneylending,&amp;rdquo; said Mr Reddy, who was criticised before the credit crisis for his conservative approach to policymaking.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;&amp;ldquo;Also, if you look at it, the resource is leveraged, it&amp;rsquo;s not just moneylending business. The moneylender normally lends out his own money, whereas here the MFI is actually borrowing money from depositors and lending the money. So essentially, he is a moneylender, but a leveraged moneylender.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;Many admit to the fact that the industry has gone astray with the lure of superlative returns as private equity investors such as Sequoia Capital smelt an opportunity. But that did not mean that its role in financial inclusion could be discarded.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;&amp;ldquo;Yes, I agree with Mr Reddy when he says a lot of perverse incentives got aligned,&amp;rdquo; said Vijay Mahajan, chairman of BASIX, a micro lender, and head of Microfinance Institutions Network. &amp;ldquo;Here perverse incentives got aligned like in the US and in two years the sector went from helping the poor to preying on the poor.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;These institutions are no more the not-for-profit ones as envisioned by Nobel Laureate Mohammed Yunus, so regulations are essential, says Reddy. Bangladesh-born Yunus had seen micro lending as a vehicle to lift people out of poverty rather than enhance returns of wealthy investors in private equity funds.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;&amp;ldquo;The idea that MFIs should be treated like banks but given soft regulations is dangerous,&amp;rdquo; said Mr Reddy. &amp;ldquo;We had a somewhat similar experience with urban co-operative banks.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;em&gt;&lt;font &gt;(With inputs from Ruchira Roy in Mumbai)&lt;/font&gt;&lt;br /&gt;&lt;/em&gt;&lt;br /&gt;&lt;/div&gt;&#039;,
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	&#039;id&#039; =&gt; (int) 4378,
	&#039;title&#039; =&gt; &#039;MFIs similar to moneylenders, says Reddy by Gayatri Nayak&#039;,
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&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;Yaga Venugopal Reddy , former Reserve Bank of India governor credited with saving the nation&amp;rsquo;s financial system from the 2008 meltdown, has said what many finance experts believed, but did not have the courage to admit publicly: microfinance is India&amp;rsquo;s subprime.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;&amp;ldquo;Ultimately, it&amp;rsquo;s something like subprime lending,&amp;rdquo; Mr Reddy told ET in an interview ahead of his book release. &amp;ldquo;The same incentives are operating here... it was securitisation and derivatives that operated in the US. Here it is the priority sector lending by banks.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;Subprime lending refers to loans extended to people with poor repaying ability that ultimately led to defaults.&lt;/font&gt;&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;&lt;/font&gt;
&lt;/div&gt;
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&amp;nbsp;
&lt;/div&gt;
&lt;div align=&quot;justify&quot;&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;The Rs 25,000-crore microfinance industry is facing tumultuous times ever since the biggest, SKS Microfinance, created a controversy two months ago by sacking chief executive Suresh Gurumani.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;There was a confluence of woes for the sector when the Andhra Pradesh government came up with legislation curbing their operations. Banks pulled back on lending as some of the institutions were behaving more like moneylenders and in some cases drove borrowers to suicide.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;Indian banks such as SBI , ICICI Bank and Axis Bank are estimated to have lent Rs 16,000 crore to micro lenders. ICICI&amp;rsquo;s lending is at Rs 2,000 crore, SBI&amp;rsquo;s at more than Rs 1,000 crore and Sidbi&amp;rsquo;s at Rs 4,000 crore, according to data from rating company Care.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;The financial magnitude may not be the same with the Indian microfinance industry being tiny compared with the subprime lending crisis that led to more than a trillion dollars of losses and sank many venerable institutions.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;But there are similarities such as opaque practices, high salaries and commissions inducing unethical business, and leverage.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;The current practices may create systemic problems too, unlike moneylenders who operate with their own money.&lt;/font&gt;&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;&lt;/font&gt;
&lt;/div&gt;
&lt;div align=&quot;justify&quot;&gt;
&amp;nbsp;
&lt;/div&gt;
&lt;div align=&quot;justify&quot;&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;&amp;ldquo;If it is profit and if there is lending, aggressively, then it&amp;rsquo;s just moneylending,&amp;rdquo; said Mr Reddy, who was criticised before the credit crisis for his conservative approach to policymaking.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;&amp;ldquo;Also, if you look at it, the resource is leveraged, it&amp;rsquo;s not just moneylending business. The moneylender normally lends out his own money, whereas here the MFI is actually borrowing money from depositors and lending the money. So essentially, he is a moneylender, but a leveraged moneylender.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;Many admit to the fact that the industry has gone astray with the lure of superlative returns as private equity investors such as Sequoia Capital smelt an opportunity. But that did not mean that its role in financial inclusion could be discarded.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;&amp;ldquo;Yes, I agree with Mr Reddy when he says a lot of perverse incentives got aligned,&amp;rdquo; said Vijay Mahajan, chairman of BASIX, a micro lender, and head of Microfinance Institutions Network. &amp;ldquo;Here perverse incentives got aligned like in the US and in two years the sector went from helping the poor to preying on the poor.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;These institutions are no more the not-for-profit ones as envisioned by Nobel Laureate Mohammed Yunus, so regulations are essential, says Reddy. Bangladesh-born Yunus had seen micro lending as a vehicle to lift people out of poverty rather than enhance returns of wealthy investors in private equity funds.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;&amp;ldquo;The idea that MFIs should be treated like banks but given soft regulations is dangerous,&amp;rdquo; said Mr Reddy. &amp;ldquo;We had a somewhat similar experience with urban co-operative banks.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;em&gt;&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;(With inputs from Ruchira Roy in Mumbai)&lt;/font&gt;&lt;br /&gt;
&lt;/em&gt;&lt;br /&gt;
&lt;/div&gt;&#039;,
	&#039;credit_writer&#039; =&gt; &#039;The Economic Times, 23 November, 2010, http://economictimes.indiatimes.com/news/economy/indicators/Microfinance-in-India-is-like-subprime-lending-Y-V-Reddy/articleshow/6972903.cms&#039;,
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Yaga Venugopal Reddy , former Reserve Bank of India governor credited with saving the nation&amp;rsquo;s financial system from the 2008 meltdown, has said what many finance experts believed, but did not have the courage to admit publicly: microfinance is India&amp;rsquo;s...&#039;
$disp = &#039;&lt;font &gt;&lt;br /&gt;&lt;/font&gt;&lt;div align=&quot;justify&quot;&gt;&lt;font &gt;Yaga Venugopal Reddy , former Reserve Bank of India governor credited with saving the nation&amp;rsquo;s financial system from the 2008 meltdown, has said what many finance experts believed, but did not have the courage to admit publicly: microfinance is India&amp;rsquo;s subprime.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;&amp;ldquo;Ultimately, it&amp;rsquo;s something like subprime lending,&amp;rdquo; Mr Reddy told ET in an interview ahead of his book release. &amp;ldquo;The same incentives are operating here... it was securitisation and derivatives that operated in the US. Here it is the priority sector lending by banks.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;Subprime lending refers to loans extended to people with poor repaying ability that ultimately led to defaults.&lt;/font&gt;&lt;br /&gt;&lt;font &gt;&lt;/font&gt;&lt;/div&gt;&lt;div align=&quot;justify&quot;&gt;&amp;nbsp;&lt;/div&gt;&lt;div align=&quot;justify&quot;&gt;&lt;font &gt;The Rs 25,000-crore microfinance industry is facing tumultuous times ever since the biggest, SKS Microfinance, created a controversy two months ago by sacking chief executive Suresh Gurumani.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;There was a confluence of woes for the sector when the Andhra Pradesh government came up with legislation curbing their operations. Banks pulled back on lending as some of the institutions were behaving more like moneylenders and in some cases drove borrowers to suicide.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;Indian banks such as SBI , ICICI Bank and Axis Bank are estimated to have lent Rs 16,000 crore to micro lenders. ICICI&amp;rsquo;s lending is at Rs 2,000 crore, SBI&amp;rsquo;s at more than Rs 1,000 crore and Sidbi&amp;rsquo;s at Rs 4,000 crore, according to data from rating company Care.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;The financial magnitude may not be the same with the Indian microfinance industry being tiny compared with the subprime lending crisis that led to more than a trillion dollars of losses and sank many venerable institutions.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;But there are similarities such as opaque practices, high salaries and commissions inducing unethical business, and leverage.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;The current practices may create systemic problems too, unlike moneylenders who operate with their own money.&lt;/font&gt;&lt;br /&gt;&lt;font &gt;&lt;/font&gt;&lt;/div&gt;&lt;div align=&quot;justify&quot;&gt;&amp;nbsp;&lt;/div&gt;&lt;div align=&quot;justify&quot;&gt;&lt;font &gt;&amp;ldquo;If it is profit and if there is lending, aggressively, then it&amp;rsquo;s just moneylending,&amp;rdquo; said Mr Reddy, who was criticised before the credit crisis for his conservative approach to policymaking.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;&amp;ldquo;Also, if you look at it, the resource is leveraged, it&amp;rsquo;s not just moneylending business. The moneylender normally lends out his own money, whereas here the MFI is actually borrowing money from depositors and lending the money. So essentially, he is a moneylender, but a leveraged moneylender.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;Many admit to the fact that the industry has gone astray with the lure of superlative returns as private equity investors such as Sequoia Capital smelt an opportunity. But that did not mean that its role in financial inclusion could be discarded.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;&amp;ldquo;Yes, I agree with Mr Reddy when he says a lot of perverse incentives got aligned,&amp;rdquo; said Vijay Mahajan, chairman of BASIX, a micro lender, and head of Microfinance Institutions Network. &amp;ldquo;Here perverse incentives got aligned like in the US and in two years the sector went from helping the poor to preying on the poor.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;These institutions are no more the not-for-profit ones as envisioned by Nobel Laureate Mohammed Yunus, so regulations are essential, says Reddy. Bangladesh-born Yunus had seen micro lending as a vehicle to lift people out of poverty rather than enhance returns of wealthy investors in private equity funds.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;&amp;ldquo;The idea that MFIs should be treated like banks but given soft regulations is dangerous,&amp;rdquo; said Mr Reddy. &amp;ldquo;We had a somewhat similar experience with urban co-operative banks.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;em&gt;&lt;font &gt;(With inputs from Ruchira Roy in Mumbai)&lt;/font&gt;&lt;br /&gt;&lt;/em&gt;&lt;br /&gt;&lt;/div&gt;&#039;
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Yaga Venugopal Reddy , former Reserve Bank of India governor credited with saving the nation&rsquo;s financial system from the 2008 meltdown, has said what many finance experts believed, but did not have the courage to admit publicly: microfinance is India&rsquo;s..."/>
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                <strong>MFIs similar to moneylenders, says Reddy by Gayatri Nayak</strong></h1>
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                <font ><br /></font><div align="justify"><font >Yaga Venugopal Reddy , former Reserve Bank of India governor credited with saving the nation&rsquo;s financial system from the 2008 meltdown, has said what many finance experts believed, but did not have the courage to admit publicly: microfinance is India&rsquo;s subprime.</font><br /><br /><font >&ldquo;Ultimately, it&rsquo;s something like subprime lending,&rdquo; Mr Reddy told ET in an interview ahead of his book release. &ldquo;The same incentives are operating here... it was securitisation and derivatives that operated in the US. Here it is the priority sector lending by banks.&rdquo;</font><br /><br /><font >Subprime lending refers to loans extended to people with poor repaying ability that ultimately led to defaults.</font><br /><font ></font></div><div align="justify">&nbsp;</div><div align="justify"><font >The Rs 25,000-crore microfinance industry is facing tumultuous times ever since the biggest, SKS Microfinance, created a controversy two months ago by sacking chief executive Suresh Gurumani.</font><br /><br /><font >There was a confluence of woes for the sector when the Andhra Pradesh government came up with legislation curbing their operations. Banks pulled back on lending as some of the institutions were behaving more like moneylenders and in some cases drove borrowers to suicide.</font><br /><br /><font >Indian banks such as SBI , ICICI Bank and Axis Bank are estimated to have lent Rs 16,000 crore to micro lenders. ICICI&rsquo;s lending is at Rs 2,000 crore, SBI&rsquo;s at more than Rs 1,000 crore and Sidbi&rsquo;s at Rs 4,000 crore, according to data from rating company Care.</font><br /><br /><font >The financial magnitude may not be the same with the Indian microfinance industry being tiny compared with the subprime lending crisis that led to more than a trillion dollars of losses and sank many venerable institutions.</font><br /><br /><font >But there are similarities such as opaque practices, high salaries and commissions inducing unethical business, and leverage.</font><br /><br /><font >The current practices may create systemic problems too, unlike moneylenders who operate with their own money.</font><br /><font ></font></div><div align="justify">&nbsp;</div><div align="justify"><font >&ldquo;If it is profit and if there is lending, aggressively, then it&rsquo;s just moneylending,&rdquo; said Mr Reddy, who was criticised before the credit crisis for his conservative approach to policymaking.</font><br /><br /><font >&ldquo;Also, if you look at it, the resource is leveraged, it&rsquo;s not just moneylending business. The moneylender normally lends out his own money, whereas here the MFI is actually borrowing money from depositors and lending the money. So essentially, he is a moneylender, but a leveraged moneylender.&rdquo;</font><br /><br /><font >Many admit to the fact that the industry has gone astray with the lure of superlative returns as private equity investors such as Sequoia Capital smelt an opportunity. But that did not mean that its role in financial inclusion could be discarded.</font><br /><br /><font >&ldquo;Yes, I agree with Mr Reddy when he says a lot of perverse incentives got aligned,&rdquo; said Vijay Mahajan, chairman of BASIX, a micro lender, and head of Microfinance Institutions Network. &ldquo;Here perverse incentives got aligned like in the US and in two years the sector went from helping the poor to preying on the poor.&rdquo;</font><br /><br /><font >These institutions are no more the not-for-profit ones as envisioned by Nobel Laureate Mohammed Yunus, so regulations are essential, says Reddy. Bangladesh-born Yunus had seen micro lending as a vehicle to lift people out of poverty rather than enhance returns of wealthy investors in private equity funds.</font><br /><br /><font >&ldquo;The idea that MFIs should be treated like banks but given soft regulations is dangerous,&rdquo; said Mr Reddy. &ldquo;We had a somewhat similar experience with urban co-operative banks.&rdquo;</font><br /><br /><em><font >(With inputs from Ruchira Roy in Mumbai)</font><br /></em><br /></div>               </font>
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&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;Yaga Venugopal Reddy , former Reserve Bank of India governor credited with saving the nation&amp;rsquo;s financial system from the 2008 meltdown, has said what many finance experts believed, but did not have the courage to admit publicly: microfinance is India&amp;rsquo;s subprime.&lt;/font&gt;&lt;br /&gt;
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&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;&amp;ldquo;Ultimately, it&amp;rsquo;s something like subprime lending,&amp;rdquo; Mr Reddy told ET in an interview ahead of his book release. &amp;ldquo;The same incentives are operating here... it was securitisation and derivatives that operated in the US. Here it is the priority sector lending by banks.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;
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&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;The Rs 25,000-crore microfinance industry is facing tumultuous times ever since the biggest, SKS Microfinance, created a controversy two months ago by sacking chief executive Suresh Gurumani.&lt;/font&gt;&lt;br /&gt;
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&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;There was a confluence of woes for the sector when the Andhra Pradesh government came up with legislation curbing their operations. Banks pulled back on lending as some of the institutions were behaving more like moneylenders and in some cases drove borrowers to suicide.&lt;/font&gt;&lt;br /&gt;
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&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;Indian banks such as SBI , ICICI Bank and Axis Bank are estimated to have lent Rs 16,000 crore to micro lenders. ICICI&amp;rsquo;s lending is at Rs 2,000 crore, SBI&amp;rsquo;s at more than Rs 1,000 crore and Sidbi&amp;rsquo;s at Rs 4,000 crore, according to data from rating company Care.&lt;/font&gt;&lt;br /&gt;
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&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;The financial magnitude may not be the same with the Indian microfinance industry being tiny compared with the subprime lending crisis that led to more than a trillion dollars of losses and sank many venerable institutions.&lt;/font&gt;&lt;br /&gt;
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&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;The current practices may create systemic problems too, unlike moneylenders who operate with their own money.&lt;/font&gt;&lt;br /&gt;
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&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;Many admit to the fact that the industry has gone astray with the lure of superlative returns as private equity investors such as Sequoia Capital smelt an opportunity. But that did not mean that its role in financial inclusion could be discarded.&lt;/font&gt;&lt;br /&gt;
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&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;&amp;ldquo;Yes, I agree with Mr Reddy when he says a lot of perverse incentives got aligned,&amp;rdquo; said Vijay Mahajan, chairman of BASIX, a micro lender, and head of Microfinance Institutions Network. &amp;ldquo;Here perverse incentives got aligned like in the US and in two years the sector went from helping the poor to preying on the poor.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;
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&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;These institutions are no more the not-for-profit ones as envisioned by Nobel Laureate Mohammed Yunus, so regulations are essential, says Reddy. Bangladesh-born Yunus had seen micro lending as a vehicle to lift people out of poverty rather than enhance returns of wealthy investors in private equity funds.&lt;/font&gt;&lt;br /&gt;
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&lt;em&gt;&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;(With inputs from Ruchira Roy in Mumbai)&lt;/font&gt;&lt;br /&gt;
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Yaga Venugopal Reddy , former Reserve Bank of India governor credited with saving the nation&amp;rsquo;s financial system from the 2008 meltdown, has said what many finance experts believed, but did not have the courage to admit publicly: microfinance is India&amp;rsquo;s...&#039;,
	&#039;disp&#039; =&gt; &#039;&lt;font &gt;&lt;br /&gt;&lt;/font&gt;&lt;div align=&quot;justify&quot;&gt;&lt;font &gt;Yaga Venugopal Reddy , former Reserve Bank of India governor credited with saving the nation&amp;rsquo;s financial system from the 2008 meltdown, has said what many finance experts believed, but did not have the courage to admit publicly: microfinance is India&amp;rsquo;s subprime.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;&amp;ldquo;Ultimately, it&amp;rsquo;s something like subprime lending,&amp;rdquo; Mr Reddy told ET in an interview ahead of his book release. &amp;ldquo;The same incentives are operating here... it was securitisation and derivatives that operated in the US. Here it is the priority sector lending by banks.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;Subprime lending refers to loans extended to people with poor repaying ability that ultimately led to defaults.&lt;/font&gt;&lt;br /&gt;&lt;font &gt;&lt;/font&gt;&lt;/div&gt;&lt;div align=&quot;justify&quot;&gt;&amp;nbsp;&lt;/div&gt;&lt;div align=&quot;justify&quot;&gt;&lt;font &gt;The Rs 25,000-crore microfinance industry is facing tumultuous times ever since the biggest, SKS Microfinance, created a controversy two months ago by sacking chief executive Suresh Gurumani.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;There was a confluence of woes for the sector when the Andhra Pradesh government came up with legislation curbing their operations. Banks pulled back on lending as some of the institutions were behaving more like moneylenders and in some cases drove borrowers to suicide.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;Indian banks such as SBI , ICICI Bank and Axis Bank are estimated to have lent Rs 16,000 crore to micro lenders. ICICI&amp;rsquo;s lending is at Rs 2,000 crore, SBI&amp;rsquo;s at more than Rs 1,000 crore and Sidbi&amp;rsquo;s at Rs 4,000 crore, according to data from rating company Care.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;The financial magnitude may not be the same with the Indian microfinance industry being tiny compared with the subprime lending crisis that led to more than a trillion dollars of losses and sank many venerable institutions.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;But there are similarities such as opaque practices, high salaries and commissions inducing unethical business, and leverage.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;The current practices may create systemic problems too, unlike moneylenders who operate with their own money.&lt;/font&gt;&lt;br /&gt;&lt;font &gt;&lt;/font&gt;&lt;/div&gt;&lt;div align=&quot;justify&quot;&gt;&amp;nbsp;&lt;/div&gt;&lt;div align=&quot;justify&quot;&gt;&lt;font &gt;&amp;ldquo;If it is profit and if there is lending, aggressively, then it&amp;rsquo;s just moneylending,&amp;rdquo; said Mr Reddy, who was criticised before the credit crisis for his conservative approach to policymaking.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;&amp;ldquo;Also, if you look at it, the resource is leveraged, it&amp;rsquo;s not just moneylending business. The moneylender normally lends out his own money, whereas here the MFI is actually borrowing money from depositors and lending the money. So essentially, he is a moneylender, but a leveraged moneylender.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;Many admit to the fact that the industry has gone astray with the lure of superlative returns as private equity investors such as Sequoia Capital smelt an opportunity. But that did not mean that its role in financial inclusion could be discarded.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;&amp;ldquo;Yes, I agree with Mr Reddy when he says a lot of perverse incentives got aligned,&amp;rdquo; said Vijay Mahajan, chairman of BASIX, a micro lender, and head of Microfinance Institutions Network. &amp;ldquo;Here perverse incentives got aligned like in the US and in two years the sector went from helping the poor to preying on the poor.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;These institutions are no more the not-for-profit ones as envisioned by Nobel Laureate Mohammed Yunus, so regulations are essential, says Reddy. Bangladesh-born Yunus had seen micro lending as a vehicle to lift people out of poverty rather than enhance returns of wealthy investors in private equity funds.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;&amp;ldquo;The idea that MFIs should be treated like banks but given soft regulations is dangerous,&amp;rdquo; said Mr Reddy. &amp;ldquo;We had a somewhat similar experience with urban co-operative banks.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;em&gt;&lt;font &gt;(With inputs from Ruchira Roy in Mumbai)&lt;/font&gt;&lt;br /&gt;&lt;/em&gt;&lt;br /&gt;&lt;/div&gt;&#039;,
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	&#039;title&#039; =&gt; &#039;MFIs similar to moneylenders, says Reddy by Gayatri Nayak&#039;,
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&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;Yaga Venugopal Reddy , former Reserve Bank of India governor credited with saving the nation&amp;rsquo;s financial system from the 2008 meltdown, has said what many finance experts believed, but did not have the courage to admit publicly: microfinance is India&amp;rsquo;s subprime.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;&amp;ldquo;Ultimately, it&amp;rsquo;s something like subprime lending,&amp;rdquo; Mr Reddy told ET in an interview ahead of his book release. &amp;ldquo;The same incentives are operating here... it was securitisation and derivatives that operated in the US. Here it is the priority sector lending by banks.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;Subprime lending refers to loans extended to people with poor repaying ability that ultimately led to defaults.&lt;/font&gt;&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;&lt;/font&gt;
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&amp;nbsp;
&lt;/div&gt;
&lt;div align=&quot;justify&quot;&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;The Rs 25,000-crore microfinance industry is facing tumultuous times ever since the biggest, SKS Microfinance, created a controversy two months ago by sacking chief executive Suresh Gurumani.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;There was a confluence of woes for the sector when the Andhra Pradesh government came up with legislation curbing their operations. Banks pulled back on lending as some of the institutions were behaving more like moneylenders and in some cases drove borrowers to suicide.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;Indian banks such as SBI , ICICI Bank and Axis Bank are estimated to have lent Rs 16,000 crore to micro lenders. ICICI&amp;rsquo;s lending is at Rs 2,000 crore, SBI&amp;rsquo;s at more than Rs 1,000 crore and Sidbi&amp;rsquo;s at Rs 4,000 crore, according to data from rating company Care.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;The financial magnitude may not be the same with the Indian microfinance industry being tiny compared with the subprime lending crisis that led to more than a trillion dollars of losses and sank many venerable institutions.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;But there are similarities such as opaque practices, high salaries and commissions inducing unethical business, and leverage.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;The current practices may create systemic problems too, unlike moneylenders who operate with their own money.&lt;/font&gt;&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;&lt;/font&gt;
&lt;/div&gt;
&lt;div align=&quot;justify&quot;&gt;
&amp;nbsp;
&lt;/div&gt;
&lt;div align=&quot;justify&quot;&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;&amp;ldquo;If it is profit and if there is lending, aggressively, then it&amp;rsquo;s just moneylending,&amp;rdquo; said Mr Reddy, who was criticised before the credit crisis for his conservative approach to policymaking.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;&amp;ldquo;Also, if you look at it, the resource is leveraged, it&amp;rsquo;s not just moneylending business. The moneylender normally lends out his own money, whereas here the MFI is actually borrowing money from depositors and lending the money. So essentially, he is a moneylender, but a leveraged moneylender.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;Many admit to the fact that the industry has gone astray with the lure of superlative returns as private equity investors such as Sequoia Capital smelt an opportunity. But that did not mean that its role in financial inclusion could be discarded.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;&amp;ldquo;Yes, I agree with Mr Reddy when he says a lot of perverse incentives got aligned,&amp;rdquo; said Vijay Mahajan, chairman of BASIX, a micro lender, and head of Microfinance Institutions Network. &amp;ldquo;Here perverse incentives got aligned like in the US and in two years the sector went from helping the poor to preying on the poor.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;These institutions are no more the not-for-profit ones as envisioned by Nobel Laureate Mohammed Yunus, so regulations are essential, says Reddy. Bangladesh-born Yunus had seen micro lending as a vehicle to lift people out of poverty rather than enhance returns of wealthy investors in private equity funds.&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;&amp;ldquo;The idea that MFIs should be treated like banks but given soft regulations is dangerous,&amp;rdquo; said Mr Reddy. &amp;ldquo;We had a somewhat similar experience with urban co-operative banks.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;
&lt;br /&gt;
&lt;em&gt;&lt;font face=&quot;arial,helvetica,sans-serif&quot; size=&quot;3&quot;&gt;(With inputs from Ruchira Roy in Mumbai)&lt;/font&gt;&lt;br /&gt;
&lt;/em&gt;&lt;br /&gt;
&lt;/div&gt;&#039;,
	&#039;credit_writer&#039; =&gt; &#039;The Economic Times, 23 November, 2010, http://economictimes.indiatimes.com/news/economy/indicators/Microfinance-in-India-is-like-subprime-lending-Y-V-Reddy/articleshow/6972903.cms&#039;,
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Yaga Venugopal Reddy , former Reserve Bank of India governor credited with saving the nation&amp;rsquo;s financial system from the 2008 meltdown, has said what many finance experts believed, but did not have the courage to admit publicly: microfinance is India&amp;rsquo;s...&#039;
$disp = &#039;&lt;font &gt;&lt;br /&gt;&lt;/font&gt;&lt;div align=&quot;justify&quot;&gt;&lt;font &gt;Yaga Venugopal Reddy , former Reserve Bank of India governor credited with saving the nation&amp;rsquo;s financial system from the 2008 meltdown, has said what many finance experts believed, but did not have the courage to admit publicly: microfinance is India&amp;rsquo;s subprime.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;&amp;ldquo;Ultimately, it&amp;rsquo;s something like subprime lending,&amp;rdquo; Mr Reddy told ET in an interview ahead of his book release. &amp;ldquo;The same incentives are operating here... it was securitisation and derivatives that operated in the US. Here it is the priority sector lending by banks.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;Subprime lending refers to loans extended to people with poor repaying ability that ultimately led to defaults.&lt;/font&gt;&lt;br /&gt;&lt;font &gt;&lt;/font&gt;&lt;/div&gt;&lt;div align=&quot;justify&quot;&gt;&amp;nbsp;&lt;/div&gt;&lt;div align=&quot;justify&quot;&gt;&lt;font &gt;The Rs 25,000-crore microfinance industry is facing tumultuous times ever since the biggest, SKS Microfinance, created a controversy two months ago by sacking chief executive Suresh Gurumani.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;There was a confluence of woes for the sector when the Andhra Pradesh government came up with legislation curbing their operations. Banks pulled back on lending as some of the institutions were behaving more like moneylenders and in some cases drove borrowers to suicide.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;Indian banks such as SBI , ICICI Bank and Axis Bank are estimated to have lent Rs 16,000 crore to micro lenders. ICICI&amp;rsquo;s lending is at Rs 2,000 crore, SBI&amp;rsquo;s at more than Rs 1,000 crore and Sidbi&amp;rsquo;s at Rs 4,000 crore, according to data from rating company Care.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;The financial magnitude may not be the same with the Indian microfinance industry being tiny compared with the subprime lending crisis that led to more than a trillion dollars of losses and sank many venerable institutions.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;But there are similarities such as opaque practices, high salaries and commissions inducing unethical business, and leverage.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;The current practices may create systemic problems too, unlike moneylenders who operate with their own money.&lt;/font&gt;&lt;br /&gt;&lt;font &gt;&lt;/font&gt;&lt;/div&gt;&lt;div align=&quot;justify&quot;&gt;&amp;nbsp;&lt;/div&gt;&lt;div align=&quot;justify&quot;&gt;&lt;font &gt;&amp;ldquo;If it is profit and if there is lending, aggressively, then it&amp;rsquo;s just moneylending,&amp;rdquo; said Mr Reddy, who was criticised before the credit crisis for his conservative approach to policymaking.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;&amp;ldquo;Also, if you look at it, the resource is leveraged, it&amp;rsquo;s not just moneylending business. The moneylender normally lends out his own money, whereas here the MFI is actually borrowing money from depositors and lending the money. So essentially, he is a moneylender, but a leveraged moneylender.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;Many admit to the fact that the industry has gone astray with the lure of superlative returns as private equity investors such as Sequoia Capital smelt an opportunity. But that did not mean that its role in financial inclusion could be discarded.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;&amp;ldquo;Yes, I agree with Mr Reddy when he says a lot of perverse incentives got aligned,&amp;rdquo; said Vijay Mahajan, chairman of BASIX, a micro lender, and head of Microfinance Institutions Network. &amp;ldquo;Here perverse incentives got aligned like in the US and in two years the sector went from helping the poor to preying on the poor.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;These institutions are no more the not-for-profit ones as envisioned by Nobel Laureate Mohammed Yunus, so regulations are essential, says Reddy. Bangladesh-born Yunus had seen micro lending as a vehicle to lift people out of poverty rather than enhance returns of wealthy investors in private equity funds.&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;font &gt;&amp;ldquo;The idea that MFIs should be treated like banks but given soft regulations is dangerous,&amp;rdquo; said Mr Reddy. &amp;ldquo;We had a somewhat similar experience with urban co-operative banks.&amp;rdquo;&lt;/font&gt;&lt;br /&gt;&lt;br /&gt;&lt;em&gt;&lt;font &gt;(With inputs from Ruchira Roy in Mumbai)&lt;/font&gt;&lt;br /&gt;&lt;/em&gt;&lt;br /&gt;&lt;/div&gt;&#039;
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                <strong>MFIs similar to moneylenders, says Reddy by Gayatri Nayak</strong></h1>
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                <font ><br /></font><div align="justify"><font >Yaga Venugopal Reddy , former Reserve Bank of India governor credited with saving the nation&rsquo;s financial system from the 2008 meltdown, has said what many finance experts believed, but did not have the courage to admit publicly: microfinance is India&rsquo;s subprime.</font><br /><br /><font >&ldquo;Ultimately, it&rsquo;s something like subprime lending,&rdquo; Mr Reddy told ET in an interview ahead of his book release. &ldquo;The same incentives are operating here... it was securitisation and derivatives that operated in the US. Here it is the priority sector lending by banks.&rdquo;</font><br /><br /><font >Subprime lending refers to loans extended to people with poor repaying ability that ultimately led to defaults.</font><br /><font ></font></div><div align="justify">&nbsp;</div><div align="justify"><font >The Rs 25,000-crore microfinance industry is facing tumultuous times ever since the biggest, SKS Microfinance, created a controversy two months ago by sacking chief executive Suresh Gurumani.</font><br /><br /><font >There was a confluence of woes for the sector when the Andhra Pradesh government came up with legislation curbing their operations. Banks pulled back on lending as some of the institutions were behaving more like moneylenders and in some cases drove borrowers to suicide.</font><br /><br /><font >Indian banks such as SBI , ICICI Bank and Axis Bank are estimated to have lent Rs 16,000 crore to micro lenders. ICICI&rsquo;s lending is at Rs 2,000 crore, SBI&rsquo;s at more than Rs 1,000 crore and Sidbi&rsquo;s at Rs 4,000 crore, according to data from rating company Care.</font><br /><br /><font >The financial magnitude may not be the same with the Indian microfinance industry being tiny compared with the subprime lending crisis that led to more than a trillion dollars of losses and sank many venerable institutions.</font><br /><br /><font >But there are similarities such as opaque practices, high salaries and commissions inducing unethical business, and leverage.</font><br /><br /><font >The current practices may create systemic problems too, unlike moneylenders who operate with their own money.</font><br /><font ></font></div><div align="justify">&nbsp;</div><div align="justify"><font >&ldquo;If it is profit and if there is lending, aggressively, then it&rsquo;s just moneylending,&rdquo; said Mr Reddy, who was criticised before the credit crisis for his conservative approach to policymaking.</font><br /><br /><font >&ldquo;Also, if you look at it, the resource is leveraged, it&rsquo;s not just moneylending business. The moneylender normally lends out his own money, whereas here the MFI is actually borrowing money from depositors and lending the money. So essentially, he is a moneylender, but a leveraged moneylender.&rdquo;</font><br /><br /><font >Many admit to the fact that the industry has gone astray with the lure of superlative returns as private equity investors such as Sequoia Capital smelt an opportunity. But that did not mean that its role in financial inclusion could be discarded.</font><br /><br /><font >&ldquo;Yes, I agree with Mr Reddy when he says a lot of perverse incentives got aligned,&rdquo; said Vijay Mahajan, chairman of BASIX, a micro lender, and head of Microfinance Institutions Network. &ldquo;Here perverse incentives got aligned like in the US and in two years the sector went from helping the poor to preying on the poor.&rdquo;</font><br /><br /><font >These institutions are no more the not-for-profit ones as envisioned by Nobel Laureate Mohammed Yunus, so regulations are essential, says Reddy. Bangladesh-born Yunus had seen micro lending as a vehicle to lift people out of poverty rather than enhance returns of wealthy investors in private equity funds.</font><br /><br /><font >&ldquo;The idea that MFIs should be treated like banks but given soft regulations is dangerous,&rdquo; said Mr Reddy. &ldquo;We had a somewhat similar experience with urban co-operative banks.&rdquo;</font><br /><br /><em><font >(With inputs from Ruchira Roy in Mumbai)</font><br /></em><br /></div>               </font>
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<font face="arial,helvetica,sans-serif" size="3">Yaga Venugopal Reddy , former Reserve Bank of India governor credited with saving the nation&rsquo;s financial system from the 2008 meltdown, has said what many finance experts believed, but did not have the courage to admit publicly: microfinance is India&rsquo;s subprime.</font><br />
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<font face="arial,helvetica,sans-serif" size="3">&ldquo;Ultimately, it&rsquo;s something like subprime lending,&rdquo; Mr Reddy told ET in an interview ahead of his book release. &ldquo;The same incentives are operating here... it was securitisation and derivatives that operated in the US. Here it is the priority sector lending by banks.&rdquo;</font><br />
<br />
<font face="arial,helvetica,sans-serif" size="3">Subprime lending refers to loans extended to people with poor repaying ability that ultimately led to defaults.</font><br />
<font face="arial,helvetica,sans-serif" size="3"></font>
</div>
<div align="justify">
&nbsp;
</div>
<div align="justify">
<font face="arial,helvetica,sans-serif" size="3">The Rs 25,000-crore microfinance industry is facing tumultuous times ever since the biggest, SKS Microfinance, created a controversy two months ago by sacking chief executive Suresh Gurumani.</font><br />
<br />
<font face="arial,helvetica,sans-serif" size="3">There was a confluence of woes for the sector when the Andhra Pradesh government came up with legislation curbing their operations. Banks pulled back on lending as some of the institutions were behaving more like moneylenders and in some cases drove borrowers to suicide.</font><br />
<br />
<font face="arial,helvetica,sans-serif" size="3">Indian banks such as SBI , ICICI Bank and Axis Bank are estimated to have lent Rs 16,000 crore to micro lenders. ICICI&rsquo;s lending is at Rs 2,000 crore, SBI&rsquo;s at more than Rs 1,000 crore and Sidbi&rsquo;s at Rs 4,000 crore, according to data from rating company Care.</font><br />
<br />
<font face="arial,helvetica,sans-serif" size="3">The financial magnitude may not be the same with the Indian microfinance industry being tiny compared with the subprime lending crisis that led to more than a trillion dollars of losses and sank many venerable institutions.</font><br />
<br />
<font face="arial,helvetica,sans-serif" size="3">But there are similarities such as opaque practices, high salaries and commissions inducing unethical business, and leverage.</font><br />
<br />
<font face="arial,helvetica,sans-serif" size="3">The current practices may create systemic problems too, unlike moneylenders who operate with their own money.</font><br />
<font face="arial,helvetica,sans-serif" size="3"></font>
</div>
<div align="justify">
&nbsp;
</div>
<div align="justify">
<font face="arial,helvetica,sans-serif" size="3">&ldquo;If it is profit and if there is lending, aggressively, then it&rsquo;s just moneylending,&rdquo; said Mr Reddy, who was criticised before the credit crisis for his conservative approach to policymaking.</font><br />
<br />
<font face="arial,helvetica,sans-serif" size="3">&ldquo;Also, if you look at it, the resource is leveraged, it&rsquo;s not just moneylending business. The moneylender normally lends out his own money, whereas here the MFI is actually borrowing money from depositors and lending the money. So essentially, he is a moneylender, but a leveraged moneylender.&rdquo;</font><br />
<br />
<font face="arial,helvetica,sans-serif" size="3">Many admit to the fact that the industry has gone astray with the lure of superlative returns as private equity investors such as Sequoia Capital smelt an opportunity. But that did not mean that its role in financial inclusion could be discarded.</font><br />
<br />
<font face="arial,helvetica,sans-serif" size="3">&ldquo;Yes, I agree with Mr Reddy when he says a lot of perverse incentives got aligned,&rdquo; said Vijay Mahajan, chairman of BASIX, a micro lender, and head of Microfinance Institutions Network. &ldquo;Here perverse incentives got aligned like in the US and in two years the sector went from helping the poor to preying on the poor.&rdquo;</font><br />
<br />
<font face="arial,helvetica,sans-serif" size="3">These institutions are no more the not-for-profit ones as envisioned by Nobel Laureate Mohammed Yunus, so regulations are essential, says Reddy. Bangladesh-born Yunus had seen micro lending as a vehicle to lift people out of poverty rather than enhance returns of wealthy investors in private equity funds.</font><br />
<br />
<font face="arial,helvetica,sans-serif" size="3">&ldquo;The idea that MFIs should be treated like banks but given soft regulations is dangerous,&rdquo; said Mr Reddy. &ldquo;We had a somewhat similar experience with urban co-operative banks.&rdquo;</font><br />
<br />
<em><font face="arial,helvetica,sans-serif" size="3">(With inputs from Ruchira Roy in Mumbai)</font><br />
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Yaga Venugopal Reddy , former Reserve Bank of India governor credited with saving the nation&rsquo;s financial system from the 2008 meltdown, has said what many finance experts believed, but did not have the courage to admit publicly: microfinance is India&rsquo;s...',
	'disp' => '<font ><br /></font><div align="justify"><font >Yaga Venugopal Reddy , former Reserve Bank of India governor credited with saving the nation&rsquo;s financial system from the 2008 meltdown, has said what many finance experts believed, but did not have the courage to admit publicly: microfinance is India&rsquo;s subprime.</font><br /><br /><font >&ldquo;Ultimately, it&rsquo;s something like subprime lending,&rdquo; Mr Reddy told ET in an interview ahead of his book release. &ldquo;The same incentives are operating here... it was securitisation and derivatives that operated in the US. Here it is the priority sector lending by banks.&rdquo;</font><br /><br /><font >Subprime lending refers to loans extended to people with poor repaying ability that ultimately led to defaults.</font><br /><font ></font></div><div align="justify">&nbsp;</div><div align="justify"><font >The Rs 25,000-crore microfinance industry is facing tumultuous times ever since the biggest, SKS Microfinance, created a controversy two months ago by sacking chief executive Suresh Gurumani.</font><br /><br /><font >There was a confluence of woes for the sector when the Andhra Pradesh government came up with legislation curbing their operations. Banks pulled back on lending as some of the institutions were behaving more like moneylenders and in some cases drove borrowers to suicide.</font><br /><br /><font >Indian banks such as SBI , ICICI Bank and Axis Bank are estimated to have lent Rs 16,000 crore to micro lenders. ICICI&rsquo;s lending is at Rs 2,000 crore, SBI&rsquo;s at more than Rs 1,000 crore and Sidbi&rsquo;s at Rs 4,000 crore, according to data from rating company Care.</font><br /><br /><font >The financial magnitude may not be the same with the Indian microfinance industry being tiny compared with the subprime lending crisis that led to more than a trillion dollars of losses and sank many venerable institutions.</font><br /><br /><font >But there are similarities such as opaque practices, high salaries and commissions inducing unethical business, and leverage.</font><br /><br /><font >The current practices may create systemic problems too, unlike moneylenders who operate with their own money.</font><br /><font ></font></div><div align="justify">&nbsp;</div><div align="justify"><font >&ldquo;If it is profit and if there is lending, aggressively, then it&rsquo;s just moneylending,&rdquo; said Mr Reddy, who was criticised before the credit crisis for his conservative approach to policymaking.</font><br /><br /><font >&ldquo;Also, if you look at it, the resource is leveraged, it&rsquo;s not just moneylending business. The moneylender normally lends out his own money, whereas here the MFI is actually borrowing money from depositors and lending the money. So essentially, he is a moneylender, but a leveraged moneylender.&rdquo;</font><br /><br /><font >Many admit to the fact that the industry has gone astray with the lure of superlative returns as private equity investors such as Sequoia Capital smelt an opportunity. But that did not mean that its role in financial inclusion could be discarded.</font><br /><br /><font >&ldquo;Yes, I agree with Mr Reddy when he says a lot of perverse incentives got aligned,&rdquo; said Vijay Mahajan, chairman of BASIX, a micro lender, and head of Microfinance Institutions Network. &ldquo;Here perverse incentives got aligned like in the US and in two years the sector went from helping the poor to preying on the poor.&rdquo;</font><br /><br /><font >These institutions are no more the not-for-profit ones as envisioned by Nobel Laureate Mohammed Yunus, so regulations are essential, says Reddy. Bangladesh-born Yunus had seen micro lending as a vehicle to lift people out of poverty rather than enhance returns of wealthy investors in private equity funds.</font><br /><br /><font >&ldquo;The idea that MFIs should be treated like banks but given soft regulations is dangerous,&rdquo; said Mr Reddy. &ldquo;We had a somewhat similar experience with urban co-operative banks.&rdquo;</font><br /><br /><em><font >(With inputs from Ruchira Roy in Mumbai)</font><br /></em><br /></div>',
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<div align="justify">
<font face="arial,helvetica,sans-serif" size="3">Yaga Venugopal Reddy , former Reserve Bank of India governor credited with saving the nation&rsquo;s financial system from the 2008 meltdown, has said what many finance experts believed, but did not have the courage to admit publicly: microfinance is India&rsquo;s subprime.</font><br />
<br />
<font face="arial,helvetica,sans-serif" size="3">&ldquo;Ultimately, it&rsquo;s something like subprime lending,&rdquo; Mr Reddy told ET in an interview ahead of his book release. &ldquo;The same incentives are operating here... it was securitisation and derivatives that operated in the US. Here it is the priority sector lending by banks.&rdquo;</font><br />
<br />
<font face="arial,helvetica,sans-serif" size="3">Subprime lending refers to loans extended to people with poor repaying ability that ultimately led to defaults.</font><br />
<font face="arial,helvetica,sans-serif" size="3"></font>
</div>
<div align="justify">
&nbsp;
</div>
<div align="justify">
<font face="arial,helvetica,sans-serif" size="3">The Rs 25,000-crore microfinance industry is facing tumultuous times ever since the biggest, SKS Microfinance, created a controversy two months ago by sacking chief executive Suresh Gurumani.</font><br />
<br />
<font face="arial,helvetica,sans-serif" size="3">There was a confluence of woes for the sector when the Andhra Pradesh government came up with legislation curbing their operations. Banks pulled back on lending as some of the institutions were behaving more like moneylenders and in some cases drove borrowers to suicide.</font><br />
<br />
<font face="arial,helvetica,sans-serif" size="3">Indian banks such as SBI , ICICI Bank and Axis Bank are estimated to have lent Rs 16,000 crore to micro lenders. ICICI&rsquo;s lending is at Rs 2,000 crore, SBI&rsquo;s at more than Rs 1,000 crore and Sidbi&rsquo;s at Rs 4,000 crore, according to data from rating company Care.</font><br />
<br />
<font face="arial,helvetica,sans-serif" size="3">The financial magnitude may not be the same with the Indian microfinance industry being tiny compared with the subprime lending crisis that led to more than a trillion dollars of losses and sank many venerable institutions.</font><br />
<br />
<font face="arial,helvetica,sans-serif" size="3">But there are similarities such as opaque practices, high salaries and commissions inducing unethical business, and leverage.</font><br />
<br />
<font face="arial,helvetica,sans-serif" size="3">The current practices may create systemic problems too, unlike moneylenders who operate with their own money.</font><br />
<font face="arial,helvetica,sans-serif" size="3"></font>
</div>
<div align="justify">
&nbsp;
</div>
<div align="justify">
<font face="arial,helvetica,sans-serif" size="3">&ldquo;If it is profit and if there is lending, aggressively, then it&rsquo;s just moneylending,&rdquo; said Mr Reddy, who was criticised before the credit crisis for his conservative approach to policymaking.</font><br />
<br />
<font face="arial,helvetica,sans-serif" size="3">&ldquo;Also, if you look at it, the resource is leveraged, it&rsquo;s not just moneylending business. The moneylender normally lends out his own money, whereas here the MFI is actually borrowing money from depositors and lending the money. So essentially, he is a moneylender, but a leveraged moneylender.&rdquo;</font><br />
<br />
<font face="arial,helvetica,sans-serif" size="3">Many admit to the fact that the industry has gone astray with the lure of superlative returns as private equity investors such as Sequoia Capital smelt an opportunity. But that did not mean that its role in financial inclusion could be discarded.</font><br />
<br />
<font face="arial,helvetica,sans-serif" size="3">&ldquo;Yes, I agree with Mr Reddy when he says a lot of perverse incentives got aligned,&rdquo; said Vijay Mahajan, chairman of BASIX, a micro lender, and head of Microfinance Institutions Network. &ldquo;Here perverse incentives got aligned like in the US and in two years the sector went from helping the poor to preying on the poor.&rdquo;</font><br />
<br />
<font face="arial,helvetica,sans-serif" size="3">These institutions are no more the not-for-profit ones as envisioned by Nobel Laureate Mohammed Yunus, so regulations are essential, says Reddy. Bangladesh-born Yunus had seen micro lending as a vehicle to lift people out of poverty rather than enhance returns of wealthy investors in private equity funds.</font><br />
<br />
<font face="arial,helvetica,sans-serif" size="3">&ldquo;The idea that MFIs should be treated like banks but given soft regulations is dangerous,&rdquo; said Mr Reddy. &ldquo;We had a somewhat similar experience with urban co-operative banks.&rdquo;</font><br />
<br />
<em><font face="arial,helvetica,sans-serif" size="3">(With inputs from Ruchira Roy in Mumbai)</font><br />
</em><br />
</div>',
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Yaga Venugopal Reddy , former Reserve Bank of India governor credited with saving the nation&rsquo;s financial system from the 2008 meltdown, has said what many finance experts believed, but did not have the courage to admit publicly: microfinance is India&rsquo;s...'
$disp = '<font ><br /></font><div align="justify"><font >Yaga Venugopal Reddy , former Reserve Bank of India governor credited with saving the nation&rsquo;s financial system from the 2008 meltdown, has said what many finance experts believed, but did not have the courage to admit publicly: microfinance is India&rsquo;s subprime.</font><br /><br /><font >&ldquo;Ultimately, it&rsquo;s something like subprime lending,&rdquo; Mr Reddy told ET in an interview ahead of his book release. &ldquo;The same incentives are operating here... it was securitisation and derivatives that operated in the US. Here it is the priority sector lending by banks.&rdquo;</font><br /><br /><font >Subprime lending refers to loans extended to people with poor repaying ability that ultimately led to defaults.</font><br /><font ></font></div><div align="justify">&nbsp;</div><div align="justify"><font >The Rs 25,000-crore microfinance industry is facing tumultuous times ever since the biggest, SKS Microfinance, created a controversy two months ago by sacking chief executive Suresh Gurumani.</font><br /><br /><font >There was a confluence of woes for the sector when the Andhra Pradesh government came up with legislation curbing their operations. Banks pulled back on lending as some of the institutions were behaving more like moneylenders and in some cases drove borrowers to suicide.</font><br /><br /><font >Indian banks such as SBI , ICICI Bank and Axis Bank are estimated to have lent Rs 16,000 crore to micro lenders. ICICI&rsquo;s lending is at Rs 2,000 crore, SBI&rsquo;s at more than Rs 1,000 crore and Sidbi&rsquo;s at Rs 4,000 crore, according to data from rating company Care.</font><br /><br /><font >The financial magnitude may not be the same with the Indian microfinance industry being tiny compared with the subprime lending crisis that led to more than a trillion dollars of losses and sank many venerable institutions.</font><br /><br /><font >But there are similarities such as opaque practices, high salaries and commissions inducing unethical business, and leverage.</font><br /><br /><font >The current practices may create systemic problems too, unlike moneylenders who operate with their own money.</font><br /><font ></font></div><div align="justify">&nbsp;</div><div align="justify"><font >&ldquo;If it is profit and if there is lending, aggressively, then it&rsquo;s just moneylending,&rdquo; said Mr Reddy, who was criticised before the credit crisis for his conservative approach to policymaking.</font><br /><br /><font >&ldquo;Also, if you look at it, the resource is leveraged, it&rsquo;s not just moneylending business. The moneylender normally lends out his own money, whereas here the MFI is actually borrowing money from depositors and lending the money. So essentially, he is a moneylender, but a leveraged moneylender.&rdquo;</font><br /><br /><font >Many admit to the fact that the industry has gone astray with the lure of superlative returns as private equity investors such as Sequoia Capital smelt an opportunity. But that did not mean that its role in financial inclusion could be discarded.</font><br /><br /><font >&ldquo;Yes, I agree with Mr Reddy when he says a lot of perverse incentives got aligned,&rdquo; said Vijay Mahajan, chairman of BASIX, a micro lender, and head of Microfinance Institutions Network. &ldquo;Here perverse incentives got aligned like in the US and in two years the sector went from helping the poor to preying on the poor.&rdquo;</font><br /><br /><font >These institutions are no more the not-for-profit ones as envisioned by Nobel Laureate Mohammed Yunus, so regulations are essential, says Reddy. Bangladesh-born Yunus had seen micro lending as a vehicle to lift people out of poverty rather than enhance returns of wealthy investors in private equity funds.</font><br /><br /><font >&ldquo;The idea that MFIs should be treated like banks but given soft regulations is dangerous,&rdquo; said Mr Reddy. &ldquo;We had a somewhat similar experience with urban co-operative banks.&rdquo;</font><br /><br /><em><font >(With inputs from Ruchira Roy in Mumbai)</font><br /></em><br /></div>'
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MFIs similar to moneylenders, says Reddy by Gayatri Nayak

Yaga Venugopal Reddy , former Reserve Bank of India governor credited with saving the nation’s financial system from the 2008 meltdown, has said what many finance experts believed, but did not have the courage to admit publicly: microfinance is India’s subprime. “Ultimately, it’s something like subprime lending,” Mr Reddy told ET in an interview ahead of his book release. “The same incentives are operating here... it was securitisation and derivatives that operated in the US. Here it is the priority sector lending by banks.” Subprime lending refers to loans extended to people with poor repaying ability that ultimately led to defaults.   The Rs 25,000-crore microfinance industry is facing tumultuous times ever since the biggest, SKS Microfinance, created a controversy two months ago by sacking chief executive Suresh Gurumani. There was a confluence of woes for the sector when the Andhra Pradesh government came up with legislation curbing their operations. Banks pulled back on lending as some of the institutions were behaving more like moneylenders and in some cases drove borrowers to suicide. Indian banks such as SBI , ICICI Bank and Axis Bank are estimated to have lent Rs 16,000 crore to micro lenders. ICICI’s lending is at Rs 2,000 crore, SBI’s at more than Rs 1,000 crore and Sidbi’s at Rs 4,000 crore, according to data from rating company Care. The financial magnitude may not be the same with the Indian microfinance industry being tiny compared with the subprime lending crisis that led to more than a trillion dollars of losses and sank many venerable institutions. But there are similarities such as opaque practices, high salaries and commissions inducing unethical business, and leverage. The current practices may create systemic problems too, unlike moneylenders who operate with their own money.   “If it is profit and if there is lending, aggressively, then it’s just moneylending,” said Mr Reddy, who was criticised before the credit crisis for his conservative approach to policymaking. “Also, if you look at it, the resource is leveraged, it’s not just moneylending business. The moneylender normally lends out his own money, whereas here the MFI is actually borrowing money from depositors and lending the money. So essentially, he is a moneylender, but a leveraged moneylender.” Many admit to the fact that the industry has gone astray with the lure of superlative returns as private equity investors such as Sequoia Capital smelt an opportunity. But that did not mean that its role in financial inclusion could be discarded. “Yes, I agree with Mr Reddy when he says a lot of perverse incentives got aligned,” said Vijay Mahajan, chairman of BASIX, a micro lender, and head of Microfinance Institutions Network. “Here perverse incentives got aligned like in the US and in two years the sector went from helping the poor to preying on the poor.” These institutions are no more the not-for-profit ones as envisioned by Nobel Laureate Mohammed Yunus, so regulations are essential, says Reddy. Bangladesh-born Yunus had seen micro lending as a vehicle to lift people out of poverty rather than enhance returns of wealthy investors in private equity funds. “The idea that MFIs should be treated like banks but given soft regulations is dangerous,” said Mr Reddy. “We had a somewhat similar experience with urban co-operative banks.” (With inputs from Ruchira Roy in Mumbai)