MICROCAPITAL BRIEF: Reserve Bank of India (RBI) Indicates No Interest in Rate Cap, States It Has No Solution For Microfinance Institutions (MFIs) Whose Clients Won’t Repay Their Loans

The Reserve Bank of India (RBI) recently stated that it has no solution for microfinance institutions (MFIs) whose clients refuse to repay their loans amidst the recent turmoil in India’s microfinance industry.

The deputy governor of the RBI, KC Chakrabarty, in comments highlighting his contention that MFIs must verify their borrowers’ creditworthiness before lending to them, reportedly said that MFIs in India “should bring good lending practices to the fore” and should not “exploit” borrowers with high rates.

Responding to a question regarding whether or not MFIs would be asked to reduce interest rates, Mr Chakrabarty said “In a competitive environment, pricing comes out of competition. I cannot force a person to reduce the price [1].”

By John Howard-Smith, Research Associate

[1] Daily News and Analysis: “We have no solution for microfinance institutions who have been hit: RBI”, http://www.dnaindia.com/india/report_we-have-no-solution-for-microfinance-institutions-who-have-been-hit-rbi_1488123

MicroCapital.org story, December 20, 2010: “MICROCAPITAL BRIEF: ACCESS Development Services of India Releases “State of the Sector Report 2010? Questioning Role of Microfinance Institutions (MFIs) as Responsible Lenders”, https://www.microcapital.org/microcapital-brief-access-development-services-of-india-releases-state-of-the-sector-report-2010-questioning-role-of-microfinance-institutions-mfis-as-responsible-lenders/

MicroCapital.org story, December 17, 2010: “MICROCAPITAL BRIEF: Local Government in Indian State of Andhra Pradesh Considers Additional Microfinance Regulation, Requires Disclosure of Operational Procedures”, https://www.microcapital.org/microcapital-brief-local-government-in-indian-state-of-andhra-pradesh-considers-additional-microfinance-regulation-requires-disclosure-of-operational-procedures/

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