Mumbai: reserve Bank of India The RBI has said that it proposes to make micro loans collateral free not only for microfinance institutions (MFIs) but also for all lenders. This follows the adoption of stringent collection measures by non-MFIs, arbitration for various regulations MFI and other lenders.
RBI Deputy Governor Rajeshwar Rao, while delivering the inaugural address at the Sa-Dhan National Conference on ‘Reviving Financial Inclusion’, said the existing rules have created an unlevel playing field. “The current regulatory framework, which was set up with the objective of providing loans to low-income households and protecting borrowers from the lenders’ harsh recovery practices, applies only to NBFC-MFIs. While other lenders, who now have The microfinance portfolio, which accounts for about 70%, is not subject to the same regulatory conditions,” he said.
Rao asked the lenders to be cautious and not copy the big ones as micro loans have a social purpose. “Prioritizing profitability at the expense of social and welfare goals of microfinance may not be an optimal outcome. Lenders need to be aware of the fact that balance sheet growth should not be created by compromising on prudent conduct, ” They said.
Rao told that the borrowers taking micro loans have the following types of shortfalls collateral Preferred by lenders. However, he said, lenders still take back whatever collateral they have to pledge. “This is more to induce repayment rather than recovery of losses. Therefore, it is proposed to extend the collateral-free nature of microfinance loans, as applicable to NBFC-MFIs, to all lenders in the microfinance space. ”
RBI Deputy Governor Rajeshwar Rao, while delivering the inaugural address at the Sa-Dhan National Conference on ‘Reviving Financial Inclusion’, said the existing rules have created an unlevel playing field. “The current regulatory framework, which was set up with the objective of providing loans to low-income households and protecting borrowers from the lenders’ harsh recovery practices, applies only to NBFC-MFIs. While other lenders, who now have The microfinance portfolio, which accounts for about 70%, is not subject to the same regulatory conditions,” he said.
Rao asked the lenders to be cautious and not copy the big ones as micro loans have a social purpose. “Prioritizing profitability at the expense of social and welfare goals of microfinance may not be an optimal outcome. Lenders need to be aware of the fact that balance sheet growth should not be created by compromising on prudent conduct, ” They said.
Rao told that the borrowers taking micro loans have the following types of shortfalls collateral Preferred by lenders. However, he said, lenders still take back whatever collateral they have to pledge. “This is more to induce repayment rather than recovery of losses. Therefore, it is proposed to extend the collateral-free nature of microfinance loans, as applicable to NBFC-MFIs, to all lenders in the microfinance space. ”
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