Financial sector expert Y.H. Malegam will head a Reserve Bank of India (RBI) panel to look into the functioning of Microfinance institutions or MFIs and their regulations. The MFIs are in the business of giving tiny loans. Kumar Mangalam Birla, Shashi Rajagopalan and U.R. Rao – all on the boards of the Indian central bank – and RBI deputy governor K.C. Chakrabarty are the members of the panel. The committee, which will...
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Suicide leash on lenders
Public uproar over 20 suicides in two months has forced the Andhra Pradesh government to act to regulate micro-finance institutions. On October 14, the state government brought an ordinance making it compulsory for MFIs to register themselves, declare the effective rate of interest they charge, ensure that no security is sought for loans and no coercion is used for recovery. Non-compliance will be punished with a three-year prison term and a...
More »The ugly underbelly of Microfinance by Roli Srivastava, Swati Bharadwaj-Chand & Partha Sinha
SKS Microfinance, India's largest Microfinance player, arrived with a bang with its hugely successful IPO in August. However, the recent sacking of its MD and CEO Suresh Gurumani has opened up a pandora's box that is now threatening to expose the ugly underbelly of the sector which, many allege, is teeming with players who are no better than moneylenders but have so far been able to operate under the pious...
More »MFI interest rate on loans likely to be capped at around 24 pc by Mashusudan Sahoo and George Mathew
Interest rates on loans from Microfinance institutions (MFIs) are likely to be capped at around 24 per cent. Currently, MFIs are charging 26-40 per cent on small loans extended to their rural customers — many of whom are yet to get even a bank account — while urban customers get personal loans at 12 per cent from commercial banks. Though neither the RBI nor the government has fixed any ceiling on...
More »MFIs vs moneylenders
The Andhra Pradesh Microfinance Institutions (Regulation of Money Lending) Ordinance, 2010, suggests there’s more politics than understanding of economics that went into it. The setting up of district registering authority under the ordinance, with elaborate powers to even cancel licences, will increase risks of operations posing serious hazard to business plans and will jeopardise the whole MFI network. Especially stifling is the requirement that MFIs have to submit a monthly...
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