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Home Legal India RBI may relax NBFC-MFI norms

RBI may relax NBFC-MFI norms

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Subbarao says aware of compliance, financing problems and regulators need to address these

The Reserve Bank of India (RBI) is likely to relax some of the norms pertaining to microfinance institutions’ net worth, capital adequacy and provisioning needs.

“The roll-out of the new regulatory regime has run into some bottlenecks. Some MFIs are unable to comply with the qualifying asset criterion for registering as non-banking finance company-MFIs and, therefore, banks are reluctant to make fresh loans to them, as such loans do not qualify as priority sector lending,” RBI governor D Subbarao said at an event organised by Indian Overseas Bank.

“Small MFIs are also not able to meet the Rs 5 crore entry point capital to be eligible to register as an NBFC-MFI. In particular, Andhra Pradesh-based MFIs, saddled with huge losses, large NPAs (non-performing assets) and eroded capital, are facing an especially acute problem in complying with the capital and provisioning norms. RBI is working on resolving these issues, so that MFI operations can get back on track,” he added.

On December 2, 2011, the NBFC-MFI was created as a new category of finance company, and told to ensure 100 per cent provisioning on aggregate loan instalments overdue for 180 days or more. MFIs were so far maintaining 10 per cent provisioning on the loan amount where repayment was due to this extent. These norms were supposed to be effective from April 1. In March, the banking regulator had extended the deadline for new provisioning and asset classification norms by a year, to allow the troubled sector more time to get their house back in order. These rules, RBI said, would be effective from April 1, 2013.


 

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