RBI Sub-Committee to study Issues and Concerns in MFI Sector

There have been some concerns expressed in the media about high interest rates, coercive recovery processes and multiple lending practised by some microfinance institutions. The State of Andhra Pradesh has recently issued an ordinance making registration of microfinance institutions (MFIs) with the State governments compulsory.

In order to study these and other related issues and implications for its policies and given the useful role played by the microfinance institutions in providing access to financial services to the poor and excluded, the Reserve Bank of India has set up a Sub-Committee of the Central Board of Directors of the Reserve Bank to study the issues and concerns in this sector, including ways and means of making interest rates charged by them reasonable. Shri Y H Malegam, a senior member on the Central Board of Directors of the Reserve Bank of India will chair the Sub-Committee.  The Sub-Committee will submit its report in three months.

The Reserve Bank of India regulates only those microfinance institutions which are registered with it as non-banking finance companies. Although the registered companies cover over 80 per cent of the microfinance business, in terms of number of companies they constitute a small percentage of the total number of MFIs in the country.  The Reserve Bank, however, does not prescribe lending rates for these institutions. 

Alpana Killawala
Chief General Manager

Press Release : 2010-2011/546