'Proactive RBI can help people understand microcredit biz'

A proactive role from RBI is needed in helping people distinguish between micro finance and chit funds, which are often confused as one, according to NBFC outfit Satin Creditcare.
Microfinance credit served by non-banking financial companies (NBFCs) is typically about looking at the bottom of the pyramid, Satin Creditcare Networks Ltd CMD H P Singh said.
The Reserve Bank has a major role to play. Small-time people talk about loan waiver, not paying instalments etc. But NBFCs are organised financial institutions regulated by RBI, he said.
"I think a lot of people who are unorganised are working in these (micro lending) areas, like chit funds. So, why are we clubbed with them?," he asked.

"There has to be clear cut answers to that. A more active role on the part of RBI is needed where we can become stronger in terms of a mechanism where all these unscrupulous elements (chit funds) are taken out of the system," he reasoned.
Often, it also happens that borrowers refuse to repay loans upon hearing about loan waiver schemes without understanding that NBFCs are not government owned but merely RBI regulated.

Asked about the impact on business post-demonetisation, Singh said that a majority of people applying for micro credit are from the unorganised sector and there was an impact on their livelihood which did hit borrowers' repayment capacity.

The RBI gave a breather to NBFCs, allowing borrowers extra 60 days for loans due between November 1 and December 31, 2016 as sub-standard.
"When cash goes out of the system, definitely it will affect to a certain extent. The interim collection efficiencies had gone down," Singh said.
Satin Creditcare also sees a bottomline hit in 2016-17 from loan write-offs because of delegalisation of old Rs 500 and Rs 1,000 notes.
"Whatever will be the write-off due to demonetisation, it will impact our bottomline. It will be after April that we will be able to assesses how much we have technically written off. It will not be very significant though," he added.