MICROCAPITAL BRIEF: Reserve Bank of India (RBI) Grants Self-Regulatory Organization (SRO) Status to Indian Microfinance Network Sa-Dhan

Sa-Dhan, a microfinance network in India with 251 member organizations, reportedly has been granted status as a self-regulatory organization (SRO) by the Reserve Bank of India, the country’s central banking authority. This status change is expected to give the organization the authority to monitor member microfinance institutions (MFIs) and ensure that those lenders are in compliance with Sa-Dhan’s code of conduct. SROs are required to develop a code of conduct for members and ensure compliance, as well as to establish an effective grievance redressal system for borrowers and a system for resolving disputes between member organizations. In addition, Non-Banking Financial Company (NBFC) MFIs in the country, which must report to SROs, will now have a choice between reporting to Sa-Dhan or to the Microfinance Institutions Network (MFIN), a trade association composed of 47 Indian microlenders that operate as NBFCs and has also been granted SRO status.

As of March 2010, Sa-Dhan reported that its 251 member organizations serve 25.8 million clients, with an aggregate gross loan portfolio of INR 171 billion (USD 3.79 billion). 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) and total reserves of of USD 263 billion.

By Makai McClintock, Research Associate

About Sa-Dhan:
Founded in 1999, Sa-Dhan is an Indian association of financial institutions that aims to build the field of community development finance in India. As of March 2010, Sa-Dhan reported serving 25.8 million clients through 251 member organizations, which hold an aggregate gross loan portfolio of INR 171 billion (USD 3.79 billion).

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. As of 2015, MFIN has been approved by 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:

LiveMint Article: Sa-Dhan gets self-regulatory organization status after MFIN

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

MicroCapital Universe Profile: Sa-Dahn https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Sa-Dhan

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