MICROCAPITAL BRIEF: Dr C Rangarajan, Chairman of the Indian Prime Minister’s Economic Advisory Council Asks Microfinance Institutions (MFIs) to Consider Borrowers’ “Repayment Capacity” To Avoid Default

Dr C Rangarajan, Chairman of the Indian Prime Minister’s Economic Advisory Council, recently asked India’s microfinance institutions (MFIs) to consider borrowers’ repayment capacity when setting interest rates on loans. He said, “It is necessary to ensure that [the] burden on the borrower… [will not] make him default. It is necessary for MFIs to keep the overall cost to borrowers… at a level that is consistent with their repaying capacity.” Mr Rangarajan additionally commented that MFIs should separate “pure interest” costs from borrower-incurred costs.

By Julia Korn, Research Associate

About C. Rangarajan:

Born in 1932, Dr C Rangarajan has been Chairman of the Indian Prime Minister’s Economic Advisory Council since August 2009. He was a member of Rajya Sabha, India’s upper parliament house, from August 2008 to August 2009. He was the Governor of Andhra Pradesh from 1997 to 2003, was the Governor of the Reserve Bank of India (RBI) from 1992 to 1997, was a member of India’s Planning Commission from 1991 to 1992, and was the Deputy Governor for RBI from 1982 to 1991. He holds a PhD in Economics from the University of Pennsylvania in the United States.

About the Economic Advisory Council to the Prime Minister:

The Economic Advisory Council was set up to be the Indian government’s sounding board for different points of view on economic issues. As of August 2010, the council is headed by Dr C Rangarajan and its members are: Dr Saumitra Chaudhuri, Dr M Govinda Rao, Dr VS Vyas and Sh Suman K Bery. The duties of the council are as follows: “Analyzing any issue, economic or otherwise, referred by the Prime Minister and advising him thereon; addressing issues of macroeconomic importance and presenting views to the Prime Minister; submitting periodic reports to the Prime Minister on macroeconomic developments and issues with implications for economic policy; and attending to any other task as may be desired by the Prime Minister.”

Sources and Additional Resources:

[1] Rupee Times. “MFIs asked not to overburden borrowers” by Vaibhav Aggarwal on August 9, 2010. http://www.rupeetimes.com/news/personal_loan/mfis_asked_not_to_overburden_borrowers_4038.html

MicroCapital Universe. C. Rangarajan. https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=C.+Rangarajan

MicroCapital Universe. Economic Advisory Council to the Prime Minister. https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Economic+Advisory+Council+to+the+Prime+Minister

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