'Other sectors that manage the savings pools of Indians are giving tough competition to life insurance companies.'
Commercial banks have turned cautious in lending to smaller microfinance institutions (MFIs), which has compelled the latter to borrow from non-banking financial companies (NBFCs) at much higher rates. Recently Reserve Bank of India (RBI) Deputy Governor M Rajeshwar Rao slammed micro lenders for increasing their margins "disproportionately" and said these lenders were quick to pass on the increased cost to the borrowers but reluctant to pass on the benefits under the new regime, where margins are not capped.
The Reserve Bank of India (RBI) on Monday allowed microfinance lenders to fix interest rates on loans with a rider that those should not be usurious for the borrowers. A microfinance loan is defined as a collateral-free loan given to a household having an annual income of up to Rs 300,000. Each regulated entity (RE) should put in place a board-approved policy regarding pricing of microfinance loans, said the 'Master Direction - Reserve Bank of India (Regulatory Framework for Microfinance Loans) Directions, 2022'. In the past, the central bank used to announce the rates on quarterly basis.
Even today, many MFIs already distribute pension and micro insurance products to low-income households.
In December 2016, RBI had granted additional 60 days for repayment of certain loans
New players show up after 3 years; northern states take lead in loan growth.
Micro-finance institutions (MFIs) are planning to take legal action against YES Bank's move to recall a part of its loans to them.
Industry fears waiver of interest on interest would distort credit culture, may encourage borrowers who can pay to defer repayment.
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For smaller MFIs, resuming operations is more difficult because they haven't got any fresh bank credit sanctioned from their lenders.
A bunch of CEOs in their mid-30s and early 40s are trying to rectify the scenario where shady lending applications trap hapless borrowers with astronomically high interest rates and even bodily harm if the money was repaid. Anup Roy reports.
Ajit Mishra, vice president, Research, Religare Broking, answers your queries.
Microfinance portfolio of SFBs saw a muted growth of about 3% last year
Such cold-shoulder by banks also indicates a credit freeze that is hard to overcome, unless the government comes out with credit guarantee schemes for loans given by banks. Since that is not happening, and there is no indication of that too, banks are not willing to listen to RBI prodding.
Industry experts estimate that demand for loans from the sector outstrips supply by more than $80 billion.
Ajit Mishra, vice president, Research, Religare Broking, answers your queries.
MUDRA bank will help microfinancing firms to lend more.
While the total disbursement of housing loans by PSBs as well as HFCs witnessed a deceleration in 2016-17, there was significant growth for the lower slabs
These banks are finding it hard to pick up seasoned bankers at the pay they are offering
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