Home > Newsroom > The Reserve Bank of India Proposes Regulation on the Micro-Finance Sector
The Reserve Bank of India Proposes Regulation on the Micro-Finance Sector
| Date Published |
5/15/2011 |
| Author |
Marja Hoek-Smit |
| Theme |
|
| Country |
India |
The Reserve Bank of India
accepted “the broad framework of
regulations recommended by the (Malegam) Committee” in ![]()
its Monetary
Policy Statement 2011-12. The Malegam Committee was established to make
recommendations on regulating the micro-finance sector in the wake of the
Andhra Pradesh micro-finance crisis. The RBI has relaxed some of the
recommended pricing and market conduct rules proposed by the committee. The rate
pricing and margin caps and income limits it decided upon are as follows.
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It was further decided to regulate microfinance sector as a
separate category. Bank credit to Micro Finance Institutions “extended
on, or after, April 1, 2011 for on-lending to individuals and also to members
of SHGs / JLGs will be eligible for categorization as priority sector advance
under respective categories viz., agriculture, micro and small enterprise, and
micro credit (for other purposes), as indirect finance, provided not less
than 85% of total assets of MFI (other than cash, balances with banks and
financial institutions, government securities and money market instruments) are
in the nature of “qualifying assets”. In addition, aggregate amount of
loan, extended for income generating activity, is not less than 75% of the
total loans given by MFIs.”
http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=6381&Mode=0
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