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Self-regulatory organisations (SROs) are not a burden on the microfinance institutions (MFI) sector, the Reserve Bank of India (RBI) said. According to the banking regulator, SROs should handle most of the matters RBI would have otherwise handled.
“I do not see SROs being a burden on the MFI sector. We want the SROs to handle most of the matters that we would have otherwise handled. SROs should have that kind of independence from the entities that it is regulating,” said N S Vishwanathan, chief general manager-in-charge, department of non-banking supervision at RBI, at the National Financial Inclusion Conference held here.
However, RBI does not want unhealthy competition among SROs, Vishwanathan added.
The central bank had laid down the criteria for recognition of SROs for non-banking financial company (NBFC)-MFIs in November 2013. According to one of the requirements, the SRO should have at least one-third of the NBFC-MFIs registered as members at the time of recognition.
“SROs should have a reasonable number of members from the sector,” said Vishwanathan.
RBI has specified the quantum of household annual income and loan limit for MFIs to be followed by banks for qualifying under priority-sector status. According to this, loan is to be extended to a borrower whose household annual income in rural areas does not exceed Rs 60,000, while for non-rural areas, it should not exceed Rs 1.2 lakh.
Besides, the loan should not exceed Rs 35,000 in the first cycle and Rs 50,000 in the subsequent cycles. Banks have been demanding that these limits be raised. Vishwanathan said RBI would look into the issue.
M V Tanksale, CEO of Indian Banks’ Association (IBA), who was also present at the event, said SROs can play a big role in bringing credibility to the system.
‘End free ATM use’
IBA wants to charge customers in the metros for accessing other banks’ ATMs but continue with the current cap of five free transactions a month for rural customers. “We have made our recommendations to RBI that at least in the metros, the current five free usage of other bank ATMs be withdrawn so that every transaction on other-bank ATM is chargeable. At the same time, the present set up be continued in rural areas,” said Tanksale.
The issue of charging customers for ATM usage continues to be a vexed one. The issue came to the fore especially after banks were asked by state governments to place armed guards at all the ATMs after the brutal attack on a customer in Bangalore in November 2013.
According to banks, the overheads will make operations of ATMs unfeasible. The IBA says banks are losing Rs 400 crore a month because of the excess security requirements at 140,000-odd ATMs in the country. A slew of measures, including raising the inter-bank charges and limiting the number of all-free transactions at five per month, have been mooted. Currently, a customer can opt for unlimited free transactions at his own bank’s ATMs and is allowed five free transactions a month in other banks’ machines.
Irrespective of it being a free transaction for the customer or not, a bank has to pay the other a fee of Rs 15 for every transaction done at the other bank’s ATM. Meanwhile, when asked if banks have written to RBI to extend the mark-to-market loss amortisation by two more quarters, Tanksale replied in the affirmative, but did not confirm the time period for which the relief has been sought. “We have certainly requested. It is being examined.”
Fearing the heavy losses booked by the banks after the liquidity-sucking measures taken in July 2013, RBI had allowed banks to book their losses spread across four quarters in order to protect bottom lines.
On wage revision, Tanksale said the IBA is scheduled to hold a core committee group meeting with bank unions. He, however, reiterated there is no change in banks’ stance and they continue to offer a 10 per cent hike against a 15 per cent demand.
