SIDBI to resume investing in MFIs

KOLKATA: State-run Small Industries Development Bank of India, or Sidbi, is contemplating equity investment in microfinance companies after a year long hiatus. Sidbi will use a 100-crore dedicated fund, created by the government, for investing in smaller MFIs to help them grow in a regulated environment, an official said. "We are looking at a few proposals and may finalise some of them by March," S Muhnot, managing director, told ET.

The bank is also open to the idea of investing in bigger firms using its own resources. It has sought the RBI's permission to do so.

Last year, Sidbi froze equity investment in MFIs on the RBI's insistence after the sector saw an unprecedented liquidity crisis. It forced many bigger micro-lending firms to scale down business and restructure their bank loans. The government and RBI had to step in to protect the sector from virtual collapse. The RBI then framed regulations for MFIs for the first time.