Decision on MFI regulation by March-end: RBI

Reserve Bank of India (RBI) Governor D Subbarao today said a decision regarding the implementation of the Malegam committee recommendations on microfinance would be taken by March-end.

“We will interact with banks, state governments, the government of India and microfinance institutions (MFIs) and also invite feedback from the public before taking a decision,” Subbarao said while talking to analysts and researchers at the customary post-policy meet.

The committee had recommended, among other things, the creation of a sub-category for MFIs under non-banking financial companies (NBFCs) for the purpose of regulation. It had also prescribed a 24 per cent cap on interest rates charged by MFIs.

As part of a review of the report, RBI is planning to conduct a half-day workshop under Deputy Governor K C Chakrabarthy in which the issue will be discussed with stakeholders. “We will try to understand their issues,” Subbarao said.

On Tuesday, he had said more clarity was needed for regulation of MFIs.

Released last week, the Malegam report suggested a four-pillar approach to MFI regulation. This included sharing of responsibility by MFIs, industry associations, banks and RBI.

“Regulations should be neat, should not overlap and should be clear not only to us, the regulators, but also to the general public as to what has to be done by whom,” said Subbarao.

This will become clear as we implement the recommendations, he added. He further said that like Andhra Pradesh, other state governments might also bring some regulations.