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The new norms for non-banking finance company-microfinance institutions announced by the Reserve Bank of India will be beneficial for the business, feel several micro-lenders.
The Reserve Bank on Friday released new norms for classification of NBFC-MFIs and brought them under its regulatory purview.
The cap on interest and margin at 26 and 12 per cent respectively, pricing transparency and safeguards against harassment of clients by field staff are some of the important aspects of the new norms.
“It is a very positive step and auger well for growth of microfinance companies and clients,” Mr Dilli Raj, Chief Financial Officer, SKS Microfinance Ltd, told Business Line .
Now, one should go with the sole regulatory approach adopted by the apex bank, he said. Mr Suresh K. Krishna, Managing Director of Bangalore-based Grameen Koota, said the exact definition of what constitutes microfinance is the single-most merit of the guidelines.
“This is good for MFIs outside Andhra Pradesh. The tough provisioning norms will make things tough for micro-lenders in AP,” he said.
The general image of microfinance institutions may get a boost, feel some. “I think banks will start lending because of the clear definition of microfinance,” said Mr M. Udaia Kumar, Managing Director, Share Microfin.
“Our performance outside is very good. These norms will help us further,” he added.
On the implementation side, there are some uncertainties as well.
The implementation of income levels suggested for the clients and ensuring that one gets loans only from two MFIs pose many practical challenges, said Mr Krishna.
NO CHANGE IN AP
The Andhra Pradesh Government, which enacted a legislation to regulate micro-lending in October last, feels that while some aspects of the RBI norms were good, the lack of implementing mechanism would make them ineffective.
“There is no change in our stance. Reserve Bank is a regulatory authority. The Andhra Pradesh law is by legislature,” Mr Reddy Subrahmanyam, Principal Secretary, Department of Rural Development, Andhra Pradesh Government, said.
The micro loans in the State would continue to be regulated as per the State Act, he added.
So, the dual regulation and collection of about Rs 6,000 crore outstanding loans continue to haunt microfinance institutions in the State.
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