MICROCAPITAL BRIEF: Microfinance Institutions Network (MFIN) Applies to Reserve Bank of India (RBI) for Self-Regulatory Organization Status

The Microfinance Institutions Network (MFIN), a trade association composed of 47 Indian microlenders that operate as non-banking finance companies, reportedly has applied to the Reserve Bank of India (RBI), the country’s central banking authority, for status as a “self-regulatory organization” (SRO). SROs are non-governmental bodies that exercise limited authority in creating and enforcing industry regulations. RBI requirements for SROs include: seating at least one third of their board with directors independent of the trade association, incorporating microlenders of various sizes in the governing body and employing a compliance officer who is under the direction of RBI. MFIN has made structural changes to comply with these regulations, including adding three independent directors to the board with plans to add a fourth.

MFIN has received support from the Omidyar Network, a US-based philanthropic investment firm, and the International Finance Corporation (IFC), the private investment arm of the US-based World Bank Group. As of 2014, RBI has assets of INR 25 trillion (USD 408 billion).

By Meraj Husain, Research Associate

About Microfinance Institutions Network (MFIN)

The Microfinance Institutions Network (MFIN) is a trade association of 47 Indian microlenders that operate as non-banking finance companies. MFIN has received support from the Omidyar Network, a US-based philanthropic investment firm, and the International Finance Corporation (IFC), the private investment arm of the US-based World Bank Group. In 2014, MFIN applied to the Reserve Bank of India (RBI) for status as a “self-regulatory organization.”

About Reserve Bank of India (RBI)

Established in 1935, the Reserve Bank of India (RBI) undertakes consolidated supervision of the financial sector comprising commercial banks, financial institutions and non-banking finance companies (NFBCs). The current focus of RBI is to supervise financial institutions, consolidate accounting standards, resolve legal issues in cases of banking fraud, monitor non-performing assets and supervise the rating model for the banking sector. In 1979, the National Bank for Agriculture and Rural Development (NABARD) was formed at the behest of RBI to provide regulatory oversight to regional rural banks (RRBs) and to promote the development of agricultural lenders: tasks that had been the responsibility of RBI. While non-banking financial companies such as for-profit microfinance institutions operate under RBI regulations, the responsibility for inspecting agricultural lenders, RRBs, state cooperative banks, district central cooperative banks and state cooperative agricultural and rural development banks was transferred to NABARD. RBI maintains these responsibilities for for-profit MFIs. Although RBI was originally the parent organization of NABARD and until October 2010 held a 72.5 percent stake in the outfit, RBI owns a one-percent stake in NABARD as of 2011. As of 2014, RBI has assets of INR 25 trillion (USD 408 billion).

Sources and Additional Resources

[1] The Hindu Business Line: “Microfinance body seeks RBI nod for self-regulatory status,” http://www.thehindubusinessline.com/economy/policy/microfinance-body-seeks-rbi-nod-for-selfregulatory-status/article5797111.ece

MicroCapital, March 20, 2013, “2012 MicroMeter;” published by India’s Microfinance Institutions Network (MFIN),” https://www.microcapital.org/microfinance-paper-wrap-up-2012-micrometer-published-by-indias-microfinance-institutions-network-mfin/

MicroCapital, August 15, 2012, “MFTransparency Partners with Planet Rating, Microfinance Institutions Network (MFIN) of India to Improve Pricing Transparency,” https://www.microcapital.org/microcapital-brief-mftransparency-partners-with-planet-rating-microfinance-institutions-network-mfin-of-india-to-improve-pricing-transparency/

MicroCapital, April 16, 2012, “Microfinance Institutions Network (MFIN) Asks Reserve Bank of India (RBI) to Assist in Recovering Loans Outstanding in Andhra Pradesh,” https://www.microcapital.org/microcapital-brief-microfinance-institutions-network-mfin-asks-reserve-bank-of-india-rbi-to-assist-in-recovering-loans-outstanding-in-andhra-pradesh/

MicroCapital Universe Profile: Microfinance Institutions Network (MFIN)
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Microfinance+Institutions+Network+%28MFIN%29

MicroCapital Universe Profile: Reserve Bank of India (RBI)
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Reserve+Bank+of+India+%28RBI%29

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