Govt. places Bill to bring MFIs under RBI umbrella
By Vaibhav Aggarwal
May 23, 2012
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The Microfinance Institutions (Development and Regulation) Bill presented in the parliament on Tuesday proposes to bring micro financing institutions (MFI) under the banking regulator, the RBI. This comes as a move to cap the high interest rates and margins charged by the MFIs.

The copy of bill presented in the Lok Sabha read," The Bill provides for regulation of MFIs' services, such as micro-credit facilities, thrift, pension or insurance services and remittance of funds, and prohibit MFIs from carrying on activities without registration with RBI".

When enacted, the bill will give RBI a comprehensive control over the MFIs, regulating the margins, sector related benchmarks, performance standards, and fair and reasonable methods of loan recovery.

Inability to follow the guidelines and directions issued by the MFIs would result in cancellation of registration; in case of non-payment of debts, the RBI would file a petition for wind-up of the lender.

Currently under the state legislations, the bill when it passes would bring the MFI under direct control of RBI. This would bring clarity and uniformity in regulations for the MFIs.


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