Even as the incoming US President Donald Trump has vowed to make US the ‘crypto capital of the world’, India must remain extremely careful about cryptocurrency regulation, said financial services secretary M Nagaraju said today.

“I am also very sceptical of cryptocurrency, not now or after becoming the DFS Secretary, but even as an individual also I am very doubtful about entire scheme of cryptocurrency...the RBI is also very careful about that. We need to be very careful about cryptocurrency,” he said at the SBI banking & economic conclave held here today.

His comments are in-line with RBI Governor Shaktikanta Das, who has repeatedly said that cryptocurrencies pose huge risks to financial and monetary stability.

Microfinance stress

Further, commenting on the recent spike in delinquencies at microfinance institutions (MFIs), the finance secretary said that few MFIs extended loans to newly formed women led self-help groups (SHGs) without considering the repayment capacity of such entities, which subsequently harm such groups.

“Some instances I have noticed in the last few months, where some MFIs for quick gains or other reasons, without following underwriting principles, kept lending to unprepared SHGs,” he said.

He said that SHGs must first build income generating activities, which requires at least six months, before MFIs extend them a loan. “Any practises that harm women SHGs, I should be very careful,” he said.

Deposit mobilisation

The secretary also said that instead of ‘lamenting’ about slower deposit growth, lenders must find alternate avenues to raise funds and on-lend to priority sectors.

He said globally, especially in the US and China, lenders do not rely entirely on deposits to grow loan book but also use capital market to raise funds.

“Similarly we should also be able to raise money from the market through different innovative instruments and then on-lend it to the priorities, or where banking sector realises higher margins,” he said.

“Lamenting that deposits are declining, I don’t think that is a long term solution as people have become much more aware and would like to put their money where they get higher rate of interest rates,” he added.

Related Topics