Mumbai: RBI said it proposed to guarantee micro loans, not only for microfinance institutions (MFIs) but for all lenders.
It follows non-LKM adopting harsh billing measures, ending different regulations for MFIs and other lenders.
Submitting the initial address at the Sa-Dhan National Conference on ‘Revitalizing Financial Inclusion’, RBI Deputy Governor Rajeshwar Rao said that the current regulations have created a non-level playing field.
“The current regulatory framework, which is applied with the aim of making credit available for low-income households and to protect the borrower from the hard recovery practices of lenders, only applies to NBFC-MFIs.
While other lenders, which now have about 70%.
In the microfinance portfolio, it is not subject to similar regulations, “he said.
Rao asked the lenders to be careful and did not copy the big ones because microlending had social goals.
“Priority profitability at the expense of social goals and microfinance welfare may not be optimal results.
Lenders need to be aware of the fact that balance sheet growth should not be built by compromising with wise behavior,” he said.
Rao shows that the borrower taking Microloans does not have a type of collateral that is liked by the lender.
However, he noted, the lenders still took over whatever guarantee they had to promise.
“It’s more to encourage payments rather than recovering losses.
Therefore, it has been proposed to expand the collateral free properties of microfinance loans, as applicable to NBFC-MFI, for all lenders in the micro space.”
RBI: All micro loans must be free of collateral
