MFIs to be allowed to raise fund through ECB: RBI

The Reserve Bank of India (RBI) today said it will soon allow microfinance institutions to raise funds up to $10 million through external commercial borrowings (ECB).

"All MFIs of all hues will now be permitted to take ECB of (up to) $10 million," RBI Deputy Governor HR Khan said at a Microfinance India Summit here.

He said the notification in this regard will come soon and it is to be subject to hedging.

"Off course, they have to be hedged. If you don't hedge you get into difficulties," Khan said.

Acknowledging that the MFI sector is facing liquidity issue, Khan said that in the last credit policy the RBI had announced a working group on restructuring of loans.

"In case there is a problem I would request MFIs to make submissions through the [microfinance] association to the working group for special dispensation," he said.

The summit examined the challenges of the time and the need to look at the entire scope of microfinance models to meet the needs of the client.

The participants arrived at a consensus on the importance of financial inclusion and its inter-connectedness with economic growth for the client.

"[The] poor are largely unbanked and to change things for these people, we are trying to implement a financial inclusion plan as it is cost effective and the need of the hour," Punjab National Bank Executive Director Usha Ananthasubramaniam said.

The delegates, including international and national experts, also discussed the regulatory environment and the implications for the sector.