Micro Finance Entities Assured More Funds

The government today assured micro finance institutions provision of more funds and a regulatory framework in a bid to ensure greater credit to the weaker sections of the society.

"There is a mechanism for providing necessary funds to micro finance institutions through the National Bank of Agriculture and Rural Development's Rs 100 crore micro finance development fund. This is not adequate. We have to find some innovative way to provide more funds to the sector," banking and insurance secretary D C Gupta said at a conference organised by Sa-Dhan here.

Referring to high incidence of non-performing assets in other sectors, he said, "Bank finance to micro finance institutions was only Rs 1,100 crore despite the 95 per cent repayment rate of these institutions. Given the present scenario in banking industry, it make business sense for banks to increase credit flow to this sector."

Gupta said banks should come up with innovative financial products for micro finance institutions apart from the direct financing to self-help groups and credit disbursal through kisan credit cards.

Pointing to failures of co-operatives due to "dual control", the banking secretary said there was a need for regulatory framework dedicated to the micro finance institutions.

"There were some initiatives in this direction from Prime Minister's Office and a number of recommendations have come up. Government is already addressing the problem of multiple regulatory overlap," he said.