Sa-Dhan urges PM for extension of loan moratorium benefits to MFI industry

Microfinance lenders' umbrella body Sa-Dhan has urged Prime Minister Narendra Modi for an extension of the loan moratorium benefits to the MFI industry in a bid to help small-ticket borrowers, who are at the risk of being pushed into extreme hardships.

It said that despite Reserve Bank of India's circular pertaining to the moratorium on retail loans, financial institutions are refraining from extending the same benefits to microfinance institutions (MFIs).

Urging the Prime Minister to intervene on the issue of MFIs eligible for back-to-back moratorium, Sa-Dhan said there are financial institutions who are refusing to provide back-to-back moratorium to MFIs.

"If there is no timely intervention from the RBI and the government, people at large will face extremely challenging situations, which will lead to unscrupulous money lenders charging exorbitant interest rate," P Satish, Executive Director, Sa-Dhan said.

The impacts over 6 crore low-income clients (touching 30 crore lives) in over 650 districts of the country, with a portfolio of Rs 2.1 lakh crore, he said, adding that nearly 75 per cent of the microfinance loans are covered under the Shishu category of Mudra loans.

MFIs borrow from banks and development financial institutions (DFIs) to lend to the end user. Since the clients have been given a three-month moratorium, MFIs should also be provided with the moratorium facility on repayment to financial institutions, he added.

In its letter to the Prime Minister, Sa-Dhan said,There has been some misinformation and even outright denial by some DFIs, NBFCs and a few (but not all) banks that the moratorium would not cover microfinance (despite the package specifically mentioning microfinance)."