Comments
The poor will soon be able to borrow money from an exclusive ‘microfinance bank' at a reasonable rate of interest.
The Government of India, the Andhra Pradesh Government and a consortium of five banks have come together to set up the country's first exclusive microfinance bank to provide an alternative source of funds to the poor vis-a-vis microfinance institutions (MFIs).
“The feasibility study for the proposed bank is almost complete and the process, including approval from the Reserve Bank of India, is likely to be formalised next month,'' a senior official of the Government of Andhra Pradesh told Business Line .
ONLY ONE BRANCH
The initial equity would be about Rs 500 crore and operations will be completely technology driven. “Unlike normal banks, the microfinance bank would not have multiple branches in various places. The operations will be conducted from a single location with the aid of technology,'' he said.
The bank would lend to Mandala Mahila Samakhyas (MMS) which are confederations of Self-Help Groups (SHGs) at the mandal level.
A credit rating system would be followed to lend to MMS' which, in turn, could lend to the Gram Samakhyas.
The Gram Samakhyas which operate at the village level would distribute micro loans to the SHGs. “The merit in the system is that only community bodies are involved in the process so as to avoid any harassment or malpractice,'' the official said.
A technology solution similar to the core banking solution being followed by banks will be put in place for the seamless monitoring of loan disbursal and collection of dues.
The rate of interest to be charged is likely to be in the range of 12-14 per cent as against a maximum of 26 per cent allowed by the RBI for NBFC-MFIs in its policy announced recently.
Though initially the bank focus on AP — the largest microfinance market in the country — it is likely to be expanded to other States later, according to the top functionary of a public sector bank, which is among the consortium of banks.
Though dubbed as a bank, it would not accept deposits, and would confine itself to lending as a non-banking finance company.
Comments
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.