MICROCAPITAL BRIEF: Microfinance Institutions Network (MFIN) Asks Reserve Bank of India (RBI) to Assist in Recovering Loans Outstanding in Andhra Pradesh

Microfinance Institutions Network (MFIN), a trade association of 46 Indian microfinance lenders, reportedly has requested that the Reserve Bank of India (RBI) intervene on behalf of microlenders attempting to collect INR 7,000 crore (USD 1.36 billion) in loans outstanding in the Indian state of Andhra Pradesh. MFIN has asked RBI to enter into dialogue with the Andhra Pradesh government to agree on compromise that would restructure the loans outstanding. Another measure that is being proposed to stimulate the microfinance sector is the removal of the 26-percent interest rate cap on microfinance institutions (MFIs) that was promulgated in October 2010, as MicroCapital reported at the time. A MFIN spokesman stated that if the debts are not restructured, then the approximately 18 million defaulters would not be able to secure loans from MFIs in the future [1].

For the year 2010, 93 MFIs in India report to the US-based nonprofit Microfinance Information Exchange (MIX) an aggregate gross loan portfolio of USD 5.2 billion outstanding to approximately 31.7 million borrowers and total aggregate deposits of USD 300 million.

By Brendan Millan, Research Associate

About Microfinance Institutions Network (MFIN): The Microfinance Institutions Network (MFIN) is a trade association of 46 Indian microlenders that operate as non-banking finance companies and together reportedly account for approximately 80 percent of the Indian market. MFIN is supported by the Omidyar Network, a US-based philanthropic investment firm, and the International Finance Corporation (IFC), a member of the World Bank Group.

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 all microfinance institutions (MFIs) and non-banking financial companies still operate under RBI regulations, the responsibility for inspecting nonprofit MFIs, 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.

Sources and Resources:

[1] The Economic Times: “MFIN Seeks RBI’s Intervention to Enable MFIs Collect Dues”, http://articles.economictimes.indiatimes.com/2012-04-10/news/31318761_1_mfi-sector-microfinance-institutions-network-lakh-borrowers

MicroCapital.org Article, March 27, 2012, “9.2m Microfinance Borrowers in India Have Defaulted Since 2010”, https://www.microcapital.org/microcapital-brief-9-2m-microfinance-borrowers-in-india-have-defaulted-since-2010/

MicroCapital.org Article, December 20, 2011, “International Finance Corporation (IFC), India’s Microfinance Institutions Network (MFIN) Promote Reporting to Credit Information Bureau”, https://www.microcapital.org/microcapital-brief-international-finance-corporation-ifc-indias-microfinance-institutions-network-mfin-promote-reporting-to-credit-information-bureau/

MicroCapital.org Article, March 15, 2011, “Microfinance Institutions Network (MFIN), High Mark to Launch Credit Bureau in India,” https://www.microcapital.org/microcapital-brief-microfinance-institutions-network-mfin-high-mark-to-launch-credit-bureau-in-india/

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

Browse the MicroCapital Universe and add your entry to the wiki at: https://www.microcapital.org/microfinanceuniverse/

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