Credit flow to MFIs will now improve, says Malegam

Credit flow to microfinance institutions (MFIs) will be adequate in future with the new regulations, said member of Financial Sector Legislative Reforms Commission (FSLRC) Y H Malegam.

“Credit flows, perhaps, were waiting for the regulations to be issued. Now that the regulations have been issued, I think there should be adequate credit flow to the sector,” he told reporters on the sidelines of the Financial Planning Congress organised by the Financial Planning Standards Board of India here.

The microfinance sector was thrown into a tizzy in October last year, when Andhra Pradesh issued an Ordinance that sought stringent regulation of the industry, following reports of a spate of suicides by harried borrowers. Andhra was the largest MFI market in the country.

Loan recovery then slowed to a trickle and banks refused to offer fresh funds to MFIs. RBI then set up a committee under the chairmanship of Malegam, which gave its report early this year.