MFI
Microfinance institutions, also known as MFIs, offer financial services to undeserved, impoverished communities.
MFIs go for NBFC licences
An Increasing number of microfinance institutions (MFIs) are seeking non-banking finance company (NBFC) status from RBI to get wide access to funding, including bank finance.
Exemptions granted to NBFCs engaged in microfinance activities
The Task Force on Supportive Policy and Regulatory Framework for Microfinance set up by NABARD in 1999 gave various recommendations. Accordingly, it was decided to exempt such NBFCs which are engaged in (i) micro financing activities, (ii) licensed under Section 25 of the Companies Act, 1956 and (iii) which are not accepting public deposits from the purview of Sections 45-IA (registration), 45-IB (maintenance of liquid assets) and 45-IC (transfer of profits to Reserve Fund) of the RBI Act, 1934
MFIs & SHG-Bank linkage programme
In a joint fact-finding study on microfinance conducted recently by Reserve Bank and a few major banks, the following observations have been made:
(i) Some of the microfinance institutions (MFIs) financed by banks or acting as their intermediaries/partners appear to be focusing on relatively better banked areas, including areas covered by the SHG-Bank linkage programme. Competing MFIs were operating in the same area, and trying to reach out to the same set of poor, resulting in multiple lending and overburdening of rural households.
(ii) Many MFIs supported by banks were not engaging themselves in capacity building and empowerment of the groups to the desired extent. The MFIs were disbursing loans to the newly formed groups within 10–15 days of their formation, in contrast to the practice obtaining in the SHG - Bank linkage programme which takes about 6–7 months for group formation / nurturing / hand holding. As a result, cohesiveness and a sense of purpose were not being built up in the groups formed by these MFIs.
(iii) Banks, as principal financiers of MFIs, do not appear to be engaging them with regard to their systems, practices and lending policies with a view to ensuring better transparency and adherence to best practices. In many cases, no review of MFI operations was undertaken after sanctioning the credit facility.
RBI relaxes norms for NBFCs
NBFCs (Non Banking Finance Companies)registered with the Reserve Bank of India may take up insurance agency business on fee basis and without risk participation and the need to seek the bank's approval.
In a notification issued, the RBI said such NBFCs should obtain permission from the Insurance Regulatory and Development Authority and comply with the IRDA regulations for acting as "composite corporate agent with insurance companies.
MFIs of India
Magazine Forbes ,has named seven microfinance institutes of India in the list of world's top 50 microfinance institutes.
Bandhan, as well as two other Indian MFIs—Microcredit Foundation of India (ranked 13th) and Saadhana Microfin Society (15th) - have been placed even above Bangladesh-based Grameen Bank, which along with its founder Mohammed Yunus was awarded Nobel Prize last year. Besides Bandhan, Microcredit Foundation of India and Saadhana Microfin Society, other Indian entries include Grameen Koota (19th), Sharada's Women's Association for Weaker Section (23rd), SKS Microfinance Private Ltd (44th) and Asmitha Microfin Ltd (29th).
