RBI rules out intervention to support MFIs

KOLKATA: The Reserve Bank of India ( RBI) has ruled out any immediate policy intervention to support cash-strapped microfinance institutions ( MFIs).

RBI deputy governor Subir Gokarn on Tuesday said the bank would wait for any intervention until the Malegam Committee submits its report on MFIs in the middle of January. “The MFI industry might be under a little stress as banks are finding it difficult to lend to them at this moment. But the system, as a whole, is not under threat,” Mr Gokarn said on the sidelines of an outreach programme on the outskirts of Kolkata.

“Two months cannot offset the system . The concerns of stakeholders should get reflected in the report,” Mr Gokarn said. Facing liquidity crunch, MFIs have shrunk their businesses. Lenders are fearing that their borrowers would stop repayment to maintain the flow of working capital.

MFIN, an umbrella organisation for NBFC-MFIs , has requested RBI to regulate the sector and advise banks to create a Rs 1,000-crore corpus for troubled MFIs, which are going through a tough time as banks have stopped lending to them.

The deputy governor said the time frame for the Malegam Committee has been kept short as the sector is going through a crisis.

RBI sees MFIs as a very important component of its financial inclusion agenda and acknowledges their effectiveness to cover the last mile in providing loans to the people at remote corners of the country. “MFIs are an integral part of the financial inclusion, but their operations must be consistent with the financial inclusion policy ,” Mr Gokarn said.