Branch Licensing may go for ~4000 towns with sub 50K population
Let the market forces play.. ~ 4000 towns in India have sub 50,000 population
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| A Group constituted by Reserve Bank of India has recommended that domestic scheduled commercial banks (other than RRBs) may be given freedom to open branches in Tier 3 to Tier 6 centres (centres with population upto 49,999), without the prior permission of Reserve Bank of India, subject to reporting.
The Group has also recommended that domestic scheduled commercial banks (other than RRBs) may be given general permission to open branches in rural, semi-urban and urban centres in the North Eastern States and Sikkim. The Group further recommended that banks would continue to approach Reserve Bank of India for prior permission for opening of branches in Tier 1 and Tier 2 centres (centres with population of 50,000 and above as per 2001 Census). The number of branches which would be authorised by RBI based on such applications may depend, inter alia, upon various aspects including a requirement that banks may plan their annual branch expansion in such a manner that at least one-third of total number of branches opened in a financial year are in underbanked districts and financially excluded districts of underbanked States as also upon a critical assessment of the steps taken by the bank towards achieving the goal of financial inclusion such as the rate of credit growth in rural branches, growth in number of deposit accounts in rural areas and growth in credit accounts for less than Rs.25,000/- etc., The Group has also recommended that the branch authorisation policy in respect of foreign banks may remain unchanged until review of the roadmap for foreign banks. The Group is also of the view that the way forward for ensuring banking penetration and financial inclusion would be to have an appropriate combination of the physical ‘brick and mortar’ branch model and the branchless models such as Offsite ATMs/Point of Sale terminals, Business Correspondent model, mobile banking etc., and it should be basically left to the banks themselves to decide as to which model would be suitable for delivery of banking services in a particular area, depending upon the special needs of that area. |
Rainbow Trout – Uttaranchal
Angling is a good leisure sport that tests both the agility and patience of the sportsperson. Quiet moments on the banks of a gushing mountain river or stream surrounded by thickly wooded hillsides resounding with the chirping of birds can be one of the most rewarding experiences in ones lifetime. With its perennial snows, glaciers and high mountain lakes that feed the numerous streams and rivers of the state, Uttaranchal is a veritable angler’s paradise. Of the 3000 kilometres of freshwater streams and rivers, 1200 kilometres have been identified as Trout territory.
River water Trout ( retails for northwards of Rs 500 per kg at Delhi’s Khan Market)
This hardy game fish was introduced into Uttaranchal rivers by the British as early as 1863 and has flourished thanks to the constant efforts of the state fisheries department. Two of the most sporting freshwater game fish to be found in abundance in Uttaranchal rivers and streams are the Trout – brown and rainbow and the Mahseer a type of giant carp found in the warmer streams and rivers in the lower hills.
CASHPOR – Annual Performance – Very Impressive !!
Just flipped through CASHPOR’s Annual Report, considering they are a successful “not for profit” model of microfinance, some pertinent takeaways:
- A decade of experience with a GLP of INR 1810 Million with over 300,000 clients in 15 districts of East UP and Bihar.
- PAR>30 has halved to 0.69% ( against 1.77% in the previous fiscal) in a year where, without exception PAR>30 may have grown across MFIs. Really impressive.
- 66% of Cashpor’s matured clients have moved above the poverty line – Impact Assessment Study
- CASHPOR was ranked 4th in the Mix Global Composite Ranking of Profitable MFIs (For perspective, SKS was No.2)
- Capital Adequacy of 10.5% as on Mar-09 (Calculated by MCRIL) and plans to increase it to 12% by Mar-10 and continually meet the RBI CAR norms stipulated for NBFC’s. This would be achieved solely through a mix of retained earnings + subordinated debt. CASHPOR has no plans to attract commercial equity.
- MCRIL rating of Alpha(-) with a Positive Outlook
- Received Subordinated debt from Opportunity International and CORDAID
- Banking/FI relationships with 21 entities
- A Microfinance Business Manager of a leading Bank has joined CASHPOR as a Vice Chairman. This would add tremendously to their second line of leadership.
Boost to Financial Inclusion in India – The Half Million POS Terminals
Latin America has a wide Business Correspondent Banking Network where cash can be deposited/disbursed at merchant establishments.
The Khan committee reported recommended the Business Correspondent Banking Model for India and the RBI issued guidelines to that effect.
However, POS machines were not permitted to disburse cash leading to experimentation with various technologies like RFID/NFC/Smart cards/Mobile phones. Several companies emerged and offered innovative solutions, however some concerns were common – customer adaptability issues, cost etc
A week ago, the RBI deputy governor had mentioned about new guidelines for business correspondents/facilitators: RBI has now permitted cash withdrawals at POS terminals. This for now provides a proven, scalable alternative to RFID/NFC/Smart cards/Mobile phones .This will give a boost to financial inclusion.
Consider this:
- Wide Network : The total no of POS machines in India is ~ 0.5 million with Interoperability.
- Low Capex: Each POS machine costs onetime ~ Rs 7500 ( $ 175), against Rs. 100,000+ ($ 2250) monthly for an ATM + Rental of the premises
- Cost per customer: Inexpensive Rs 15 magnetic strip cards.
- RBI has permitted the merchant to earn a fee on each transaction
Heart Attack Grill
The Heart Attack Grill is a fast food hamburger restaurant in Arizona, USA. It has courted controversy by serving unashamedly high-calorie menu items with controversial names. The establishment is a hospital theme restaurant: waitresses (“nurses”) take orders (“prescriptions”) from the customers (“patients”). A tag is put on the patient’s wrist showing which foods they ordered and a “doctor” examines the “patients” with a stethoscope.
The menu includes “Single”, “Double”, “Triple”, and “Quadruple Bypass” hamburgers, ranging from 0.5 to 2 lb (0.23 to 0.91 kg) of beef (up to about 8000 calories), “Flatliner Fries” (cooked in pure lard), unfiltered cigarettes, beer and liquor, and soft drinks such as Jolt cola and Mexican Coke made with real sugar. Customers over 350 lb (160 kg) in weight eat for free if they weigh in with a doctor or nurse before each burger. Beverages and to-go orders are excluded and sharing food is also not allowed for the free food deal.
Dig In.
With Prof. Mohammad Yunus – Annual Microfinance Conference India 2009
Picture: With Professor Mohammad Yunus.
As a student of economics at University of Delhi, while doing a research paper on micro credit, i had written to Prof Yunus in 2002 seeking some information on Grameen Bank, he had responded instantly. I obviously did not know i was headed for an (exciting, enriching, stimulating, satisfying) career in micro finance.
Recommended Indulging – Bengali Cuisine @ http://sutapa.com
One of the best sources for Bengali culinary secrets. Do visit and dig in : www.sutapa.com
Step Forward @ Microfinance Transparency
Step Forward @ Microfinance Transparency
http://www.rbi.org.in/scripts/BS_CircularIndexDisplay.aspx?Id=4738#one
The RBI has mandated all NBFC’s ( including NBFC’s engaged in Microfinance (Read:MFI’s) ) to :
a) The Board of each NBFC shall adopt an interest rate model taking into account relevant factors
such as, cost of funds, margin and risk premium, etc and determine the rate of interest to be charged
for loans and advances. The rate of interest and the approach for gradations of risk and rationale for
charging different rate of interest to different categories of borrowers shall be disclosed to the
borrower or customer in the application form and communicated explicitly in the sanction letter.
b) The rates of interest and the approach for gradation of risks shall also be made available on the
web-site of the companies or published in the relevant newspapers. The information published in the
website or otherwise published should be updated whenever there is a change in the rates of
interest.
c) The rate of interest should be annualized rates so that the borrower is aware of the exact rates
that would be charged to the account.
The Crash of 2008
· President Bush said clients shouldn’t be concerned by all these bank
closings. If the bank is closed, you just use the ATM, he said.
· George Bush said that he is saddened to hear about the demise of Lehman
brothers… His thoughts at this time go out to their mother as losing one
son is hard but losing two is a tragedy.
· The problem with investment bank balance sheets is that on the left side
nothing is right and on the right side nothing is left.
· There are 30 billion prime numbers below 700 billion. The rest are all
subprime.
· How do you define optimism? A banker who irons 5 shirts on a Sunday.
· What do you call 12 investment bankers at the bottom of the ocean? A good
start.
· Why are all MBAs going back to school? To ask for their money back.
· For Geography students: What’s the capital of Iceland? Answer: About Three
Pounds Fifty…
· If you want to gamble, go to Las Vegas. If you want to trade in
derivatives, God bless you.
· What’s the difference between a guy who just lost everything in Vegas and
an investment banker? A tie.
· What’s the difference between a bond and a bond trader? A bond matures.
· Lehman(n) have changed their recommendation on Lehman(n) from hold to sell.
· Forty years ago I sold fifty shares of my company stock and had enough
money to purchase a brand-new 1967 Ford pickup. Last week, I checked it
out, and if I sold another fifty shares, I’d have enough money to buy a
1967 Ford pickup. So, the market has stablized.
The Man Who saw it all coming 6 years ago – Conquer The Crash-By Robert Prechter
Today, six years after its launch, the book (Conquer The Crash-By Robert Prechter) reads like a script.
Download the interview transcript here
Here are some highlights of the story Robert foretold in Conquer the Crash:
Collateralized Securities
“Banks and mortgage companies … package and re-sell … ’securitized loans,’ and [they] have issued $6 trillion worth of them. … In a major economic downturn, this credit structure will implode.” ~ Chapter 19
Mortgage-Backed Securities
“Major financial institutions actually invest in huge packages of … mortgages, an investment that they and their clients (which may include you) will surely regret.” ~ Chapter 16
Fannie and Freddie
“Investors in these companies’ stocks and bonds will be just as surprised when the stock prices and bond ratings collapse.” ~ Chapter 25
Banks
“Banks are not just lent to the hilt, they’re past it. In a fearful market, liquidity even on these so called ’securities’ [corporate, municipal and mortgage-backed bonds] will dry up.” … One expert advises, ‘The larger, more diversified banks at this point are the safer place to be.’ That assertion will surely be severely tested.” ~ Chapter 19
Insurance Companies
“The values of insurance company holdings, from stocks to bonds to real estate (and probably including junk bonds as well), will be falling precipitously. … As the values of most investments fall, the value of insurance companies’ portfolios will fall. … When insurance companies implode, they file for bankruptcy.” ~ Chapters 15, 24
Banking and Insurance Stocks
“We will see stocks going down 90 percent and more … [and] bank and insurance company failures.” ~ Chapter 14
Derivatives
“Leveraged derivatives pose one of the greatest risks to banks.” ~ Chapter 19
Real Estate
“What screams ‘bubble’ — giant, historic bubble — in real estate today is the system-wide extension of massive amounts of credit to finance property purchases. … [People] have been taking out home equity loans so they can buy stocks and TVs and cars. … This widespread practice is brewing a terrible disaster. ...
“The worst thing about real estate is its lack of liquidity during a bear market. … In time, there is a massive glut of real estate. … If you have a huge mortgage on a McMansion or condo that you cannot afford unless your current income maintains, sell it and move into something more reasonable.” ~ Chapter 16
Credit Deflation
“Usually the culprit behind [simultaneous stock and real estate] declines is a credit deflation. If there were ever a time we were poised for such a decline, it is now.” ~ Chapter 16
Political Leaders
“A leader does not control his country’s economy, but the economy mightily controls his image.” ~ Chapter 27
Short-Selling Ban
“In a bear market, bullish investors always come to believe that short sellers are ‘driving the market down.’ ... Authorities outlaw short selling.” ~ Chapter 20
Bailout Schemes
“If [governments] leap unwisely into bailout schemes, they will risk damaging the integrity of their own debt, triggering a fall in its price. Either way … deflation will put the brakes on their actions.” ~ Chapter 32
Rating Services
“Most rating services will not see it coming.” ~ Chapter 25
No other book more completely and accurately anticipated the financial turmoil unfolding today.
Year 2008 – The (Non) Essential Subprime Primer
click to download- Year 2008 – The (non ?)essential Sub Prime Primer
Cashpor Micro Credit – India’s Finest Microfinance Institution
Cashpor Micro Credit - India’s finest Microfinance Institution, Amongst the world’s best.
Cutting the clutter:
- Cashpor Micro Credit is a profitable Microfinance Institution, headquartered in India.
- Cashpor Micro Credit was India’s first MFI to receive an Equity Investment, from a pedigree investor i.e. Vinod Khosla (co founder of Sun Microsystems and venture capitalist, ex KPCB). Read here
- Cashpor works in India’s poorest ‘n most neglected areas (Read: Bihar and Uttar Pradesh) in a truly very focused manner.
- Cashpor genuinely and only targets the poorest of the poor clients through its unique Cashpor Housing Index.
- Cashpor voluntarily charges amongst the lowest rates of interest from its clients in India. No hidden charges, whatsoever.
- Cashpor has a brilliantly talented management team comprising of senior bankers led the almost legendary Prof David Gibbons
- Cashpor has never defaulted on any financial institution credit facility till date
- Cashpor employees are extremely motivated and believe in the vision of the company, which has resulted in low attrition.
- Above all, Cashpor is sincere, fair, transparent and ethical with all its stakeholders – Employees, Clients, Investor, Bank, Regulator and the Indian Microfinance Sector
Other Interesting Facts:
- Cashpor is headquartered in Varanasi, One of the oldest and holiest cities of India. Varanasi was voted as amongst the top ten places to visit before something by Lonely Planet.
- Varanasi or Banaras is the oldest living city in the world. Established in 7th century B.C., Varanasi is the holiest of the holy cities to Hindus. The sacred river Ganga (Ganges) flows towards the north here which is considered very auspicious by the Hindus. The most famous of all temples of Lord Shiva is situated here(Temple of Lord Viswanath). Varanasi is full of temples, probably thousands of temples are here. There are about 365 GHATs or places of bathing on the river Ganga.
- These GHATs are always crowded with devotees & pilgrims, & there are hundreds of priests to help them in their sacred rights. At evening, priests perform AARTI (worship with lighted lamps) at some of the more famous GHATs, & the scene is just beyond descriptions. Thousands of people attend this AARTI ceremony, including hundreds of foreigners. With its narrow streets teeming with people as well as (sacred) bulls, Varanasi is a must for all the foreign visitors to India who want to have a glimpse of the eternal India & Indian culture.
- Every fifth shop in Varanasi either sells Paan (Betel Leaf with a dozen filings of Indian herbs) or Milk/Milk Products
- Certain days of the year, Thandai (Thick shake made from milk, pistachios, almonds and cashew nuts) laced with marijuana cream is consumed by devotees of Shiva (Who George Clooney refers to The God of Death, in the superb Michael Clayton)
- Varanasi is home to the Banaras Hindu University, housed in some 1250 acres.
Recommended Foodventure: The Dhaba, near Convergys BPO, National Highway 8, Gurgaon, INDIA
There is this Dhaba (An eating house, set up on a modest budget serving value meals to travelers on the Great Indian Highways), just off the NH8, adjacent to the Convergys BPO in Gurgaon. It is situated on a piece of prime land which the owner refused to sell to India’s largest real estate co. around 3 decades back and rightfully so, as it is worth anywhere between 25-50 million american dollars now.
The Dhaba operates throught the day and night and serves breakfast (Pronounced:Brake-Fusht),lunch, dinner and fresh deep fried snacks, to feed the employees working in the nearby offices, some of which are BPO facilities and operate 3 shifts, 8 hours each (Read: 24×7). The Dhaba has been open for the past 9 years and offers a good alternative to the standard eateries in Gurgaon (who otherwise shamelessly scoop out frozen food from deep freezers, microwave it, garnish it and serve to undiscerning guests)
At the Dhaba, a minimum waiting time of 45 minutes gets you a ‘yet to be cleaned table’ which I imagine resembles a freshly dug graveyard with chicken/lamb bones strewn all over. The Chotu (waiter) quickly wipes off the bones and thrusts down glasses of water, which one should safely avoid and must insist of a bottle of packaged water.
One can order any of the 60 dishes (including 10 variants each of the Parantha and Maggi Instant Noodles) on the menu. I would recommended you order the signature parantha’s (thick organic whole-wheat pancakes with vegetable/meat stuffing, shallow fried in butter). The Parantha is large, the size of a medium Domino’s pizza and makes a complete meal. You have a choice of fillings – vegetables, shredded chicken or minced mutton. Each of these filings are mixed with secret Indian herbs and spices prior to getting thrusted into the dough before getting flattened and tossed onto the tawa (a big pan made of iron) full of heated butter. Each parantha is accompanied by a scoopful of freshly pickled assorted vegetables and a dollop of melting butter.
(Stuffed Parantha’s)
One can also order a “kaali Dal” (Organic Black Lentils, Ginger, Garlic, Chilies, Loads of secret indian organic spices and loads of Butter, boiled in a sealed earthen pot for a minimum of 24 hours) served with Tandoori Roti (flattened organic whole-wheat pancakes roasted in an earthen clay oven).)
I would suggest one orders a Pepsi cola to water down these various artery choking and cholesterol loaded gastronomical delights !
While eating, suggest you keep all your five senses fixated on the food as the place is not really very hygienic.
Post the meal, I recommend drinking a cup of coffee from the Caravan, (A rusting White Suzuki van with punctured tyres and a leaking roof, stationed near the dhaba, for over 5 years).
Year 1999 – The Birth of Subprime
While researching for a paper on Sub prime and the lessons for microfinance, which i am currently writing, i came across this rather interesting NY Times article dated Sep 30, 1999 which I call “The Birth of Subprime”
Must Read, click here.
Alternatively download here.
Reproduced below:
Fannie Mae Eases Credit To Aid Mortgage Lending
September 30, 1999, The New York Times
In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.
The action, which will begin as a pilot program involving 24 banks in 15 markets — including the New York metropolitan region — will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.
Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.
In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates — anywhere from three to four percentage points higher than conventional loans.
”Fannie Mae has expanded home ownership for millions of families in the 1990’s by reducing down payment requirements,” said Franklin D. Raines, Fannie Mae’s chairman and chief executive officer. ”Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.”
Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.
In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980’s.
”From the perspective of many people, including me, this is another thrift industry growing up around us,” said Peter Wallison a resident fellow at the American Enterprise Institute. ”If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.”
Under Fannie Mae’s pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 — a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.
Fannie Mae, the nation’s biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.
Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.
Home ownership has, in fact, exploded among minorities during the economic boom of the 1990’s. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University’s Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent.
In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.
Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.
In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae’s and Freddie Mac’s portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.
The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.
Recommended Eating: Kake Da Hotel (Delhi’s Best NWFP Cusine)
Recommended Eating: Kake Da Hotel (Delhi’s Best NWFP Cusine)
If you are ever driving in Connaught place – outer circle, once you zip past the Rohit Bal designed-one of Delhi’s unquestionably most serene restaurants i.e. Veda, switch off the air conditioning (if your car has one !), roll down the screens and press the car to the left until the wafting smell of kebabs, biryani’s and secret Indian curries from the 65 year old Delhi’s legendary gastronomical landmark i.e Kake Da Hotel, enters your car….
The owners of this eatery fled Multan of undivided India some 65 years back (now in Pakistan) and started this 30 cover eatery in New Delhi. There are only about 20 odd very carefully selected dishes on the menu, which haven’t changed since India won Independence and neither have any of the recipes. I think the secret to Kake’s success lies in a.> the use of Indian Masalas (Spices). Each of which is freshly ground with a pestle and mortar and not bought off the shelf from some supermarket b.> Use of Pure Desi Ghee ( Clarified Butter made from cow milk) only, this is a rarety these days as usually restaurants end up using some industrial sludge (read: vegetable oil).
A minimum waiting period of 20 minutes gets you a table. I think what is really brilliant is the Sag-Paneer ( Indian Cottage Cheese in a spinach curry), Egg Curry (Boiled Eggs in a tangy tomato-garlic-onion-ginger-secret Indian herbs curry), Sag-Meat (Mutton in a spinach curry), Murg Makhani or Butter Chicken ( Roasted Chicken in a tomato-butter-fresh cream-onion curry ) and the Meat Pulao (Basmati Rice cooked with Mutton).
Each dish is accompanied by a plate of freshly sliced onion rings with lemon juice and rock salt sprinkled on top. Along with the dishes one can order Indian breads- the Naan, Roti or a Tandoori Lachha Parantha . There are no desserts on the menu.
Must Eat, Whenever you are next in Delhi.
Address: 74, Municipal Market, Connaught Circus, New Delhi
Mobile Banking Transactions in India – Operative Guidelines for Banks (Second Draft – Sep-08)
- The central bank has decided to keep the limit on the ticket-size for mobile banking at Rs 2,500 per transaction, and Rs 5,000 per day. Banks have also been allowed to put in place a monthly transaction limit, depending on the bank’s risk perception of the customer.
- While the guidelines will enable lenders such as State Bank of India and Axis Bank to go ahead with their launch of mobile-banking services, the central bank has decided to restrict the services only to holders of debit and credit cards. The card user base in the country is 80 million, with 55 million debit card users and 25 million credit card users.
- However, it comes as a blow to players who intended to use mobile banking to reach out to the underbanked in rural India. A number of microfinance institutions and mobile payment operators such as mChek, PayMate and Obopay had tied up to offer mobile-based financial inclusion products in the hinterland. Banks, however, have been allowed to use the services of banking correspondents for extending this facility to consumers.
- Only Indian rupee-based domestic services shall be provided on the mobile-payment platform, and the use of mobile-banking for cross-border transactions have been strictly prohibited. Banks which are based, licensed and supervised in India will be allowed to offer such services. Further, only banks which have implemented the core banking platform will be allowed to offer mobile banking.
- At the same time, the RBI has recommended that all mobile banking transactions are validated through a two-factor authentication system, thereby complying to the latest security and encryption standards. The RBI has also said the long-term goal of the mobile-payment framework in India would be to enable funds transfer from and account in one bank to any other account in any bank on a real-time basis, irrespective of the mobile network the customer has subscribed to.
- The guidelines also recommend that banks do not compromise on their know-your-customer and anti-money laundering guidelines. They will also be required to file suspicious transaction reports (STRs) to the Financial Intelligence Unit for all mobile banking transactions, as in the case of regular banking transactions.
- It has also been recommended that banks explicitly state the risks to the customer and also get them to sign a contract before the service is adopted. It has also asked banks to make their mobile-banking services available across all phone networks.
- The number of mobile phone connections in the country was at about 296 million at the end of July this year and it is growing at about 8-9 million per month, according to telecom regulator Trai. Banks have been exploring the feasibility of using mobile phones as an alternative channel of delivery of banking services. Some banks have also started offering information-based services like balance enquiry, stop payment instruction of cheques, transaction enquiry, location of the nearest ATM or branch, etc. Acceptance of transfer of funds, instruction for credit to beneficiaries of same or another bank in favour of pre-registered beneficiaries have also started in a few banks, the RBI said.
Plural turns One – The Wine ‘n Cheese Party
What’s Next – The Fondue Party ?
Amongst other values, Plural maintains high confidentiality and never discloses client names.
In 1 year, Plural has achieved the amongst other’s the following milestones:
- Launched the World’s first capsule course in Microfinance – The Microfinance Passport
- Partnered to launch a leading online competition for social entrepreneurs
- Consulted, to prepare a financial inclusion vision document for a large Indian state, struck by poverty
- Conducted Impact Assessment Studies on a client of a leading microfinance funding institution
- Consulted to provide business strategy for an India MFI
Quarter Life Crisis – Must Watch Advertisement
A young nervous, “never been abroad” Techie working for some “sweat shop IT company” – is going overseas for an “on-site” assignment for 6-8 months. His parents are equally nervous and keep inquiring about what time is the flight, boarding time etc, and whether he has “packed” his bags etc ?
Watch the ad for more.
Mumbai meri jaan ( Bombay, my love)
Last night watched Mumbai Meri Jaan (Bombay, My Love) at PVR Europa (where the seats are unergonomic and the hall is perenially full of popcorn smell stench)
The Movie was superb – Must Watch. It’s India’s Crash. The movie salutes the indomitable spirit of Mumbai.
Soha Ali Khan’s best performance till date, she essays the role of a journalist reporter for some News Channel, who thinks nothing before shamelessly thrusting mikes into the faces of the bereaved, at all/any tragedy, with that infamous question many Indian reporters love asking to gather “sound bites”: “aapko kaisa mehsoos ho raha hai (How do you feel right now?)”, till her fiancé is killed in the blasts, and she is faced by the same query from a colleague.
Irfan Khan is brilliant as the “poor man”, frustrated with the city’s attitude, vends tea on his bicycle for a living and decides to teach the city a lesson
Paresh Rawal’s best performance till date, I think he lost some 15 kgs for this role of a police man about to retire in 7 days.
Madhavan and Kay Kay Menon are simply brilliant. Madhavan loves Mumbai, travels by local trains as they are – cheaper, faster and “ecological”
PS: I am looking forward to watching Amitabh Bachhan “In and As” Rituparno Ghosh’s “The Last Lear”
Be a Change Maker !
Join Changemakers and Citi in the search for innovative and cutting-edge methods that allow financial security to become a reality for everyone. Enter and showcase your work to key decision-makers and investors. Enter the contest, visit http://www.changemakers.net/.
Banking on Social Change – Seeking Financial Solutions for All
Sitting on a time bomb ! – Business Today
- MFI’s in India are gravitating towards doing “larger loans/individual lending/other forms of consumer lending”
- Larger loans are obviously very lucrative, as they earn more revenue while the cost to collect them does not increase in the same proportion.
- But, Larger Loans require different set of systems, processes and capabilities i.e credit scoring, portfolio analyzes
- As per this business today article, consumer lending finance companies in India are facing stress on their portfolio
- Ideally, once a micro borrower needs a large loan,should he not avail it from a bank.
- Prof Yunus, the creator of Microcredit, has been reiterating, see here, for the past 6 months,at every possible forum, the systemic risks involved in chasing profits or say excessive profits.
The Reasons to visit Goa
Microfinance – No.1 CSR Activity – TNS/The Times of India Survey
As per a recent TNS/Times of India Survey, The priority areas that the respondents felt ought to be covered under CSR initiatives included microfinance (99%), environment (81%), health (81%), education (82%), women empowerment (63%), livelihood promotion (62%), sanitation (61%), HIV/AIDS (54%), child care (55%), slum improvement (50%), disaster management (36%) and agricultural development (29%) .
http://timesofindia.indiatimes.com/Delhi/EVERYBODYS_BUSINESS/articleshow/3375706.cms
Source: The Times of India
The 12 Point Guide: Camouflaging an NBFC to an MFI
The Rules of the Game:
1. Rename the NBFC to some ethnic-Hindi name meaning and/or Progress,Happiness,Development,Light,Opportunity…
2. VOW never to refer your operations as business BUT always as “Program/Program Outreach..”
3. Re-Write on the website/print brochures your firm’s vision, focusing only on “alleviating poverty/improving livelihoods”
4. Re-Brand existing loan products by affixing/prefixing/suffixing “micro” to them
5. Edit your reporting style. Refer to Assets as “Borrowers/Micro Loans/Program Outreach”
6. Rating – get the NBFC rated by a rating co. specializing in MFI ratings, just for the heck of it !
7. Partner with some renowned technical advisory firm, just for the heck of it !
8. Obtain a Membership of some industry association of Microfinance, just for the heck of it !
9. Attend ALL industry events – seminars, conferences etc
10. Appoint a sector specialist debt advisor to help you raise debt from commercial banks, he will try to position you well.
11. Approach VC firms for possible equity dilution (they’ll prefer you over “not for profit” firms, anyway !)
12. Send periodic emails to the entire sector regarding the above, periodically, refer to them as milestones !
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RBI puts a temporary halt on Mobile Payment Services
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In a significant decision, the Reserve Bank of India (RBI) has restrained banks in launching their mobile payment services Read the rest of this entry »
SBI ( Read: 10,000+ branches / 8400+ ATM’s) to hire 3000 loan officers
PS: This is a potential alternative career opportunity for MFI loan officers, which are aplenty ( with maybe some/most of them possibly poorly paid and have no access to statutory benefits like Provident Fund, Insurance etc ?? ).
SHG’s to be included in the Farm Loan Waiver – 2008
As per fresh directions, all self-help groups (SHGs) of farmers are eligible for loan waiver even if disaggregated data of loan extended to each farmers of the group may not be maintained with branches. Banks offer loans to SHGs as group-loans, and therefore, no disaggregated data is maintained at branch level. Then, farmers who had availed of short-term gold loans for agricultural investment will be covered under the package.
However, the applicable interest to be waived will not be in excess of 7% in the corresponding year. Farmers who took direct agriculture investment loans for buying farm equipment like harvesters and combine will be entitled for waiver of loans.
In all these cases, farm loans overdue on December 31, 2007 and which remained unpaid until February 29, 2008, are eligible for both loan waiver and debt relief scheme.
However, the number of additional eligible farmers is not readily available. Banks have instructed their respective branches to review the list. The ministry of finance has elaborated on the details following queries raised by banks. “We’ve asked our officials to act accordingly. The finance minister has complimented the efforts of branch level people. However, the branch level officers need to put a few more days’ of hard work,” a top bank executive said.
In the circulated note, the ministry has clarified that Hindu undivided families will be covered under the package, although proprietary firms are excluded from the list. Farmers, who took short term production loans for sugarcane and banana cultivation will be covered under the scheme.
Interestingly, the ministry has also instructed banks to include insurance premium debited in the loan accounts in the eligible amount.
It categorically said: “The scheme does not apply to any loan disbursed by lending institutions prior to close of business on March 31, 1997.”
This cut-off date will, however, not apply to loans restructured and rescheduled by lending institutions in 2004 and 2006 through special packages and in the normal course as per RBI guidelines.
Sahara permitted to accept microsavings with conditions
(v) SIFCL shall ensure 100% compliance with KYC norms for all new deposits.
(vi) SIFCL shall subject to (i) (ii) (iii) above, strictly comply with the requirements of all the applicable provisions of the RBI Act, the directions, guidelines, instructions and circulars issued by RBI there-under from time to time until such time as all the deposits are repaid with interest in full. For repaying the depositors, SIFCL shall first apply its income and investments other than the investments it is required to maintain under paragraph 6 of RNBC Directions.
(vii) SIFCL shall, without prejudice to the above, be entitled to carry on its other business activities in accordance with law.
(viii) SIFCL shall submit a comprehensive business plan before the close of business on 16th August 2008.”
RBI has incorporated in its order, the offer made during the personal hearing by the Managing Worker & Chairman of SIFCL and the senior executives of SIFCL. Keeping in view quality corporate governance, they offered to (a) reconstitute the Board of Directors of SIFCL within a period of thirty days from June 16, 2008 so that the Board shall consist of 50% of such independent directors as are acceptable to Reserve Bank of India; (b) get the appointment of these independent directors ratified at the ensuing Annual General Meeting of the company and to continue the said arrangement till such time as all depositors are repaid in full; and (c) appoint statutory auditors from the panel of auditors suggested by Reserve Bank of India at the ensuing Annual General Meeting of the company envisaged by August 31, 2008 and to continue to appoint statutory auditors each year from the panel suggested by Reserve Bank of India till all depositors are repaid in full.
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Higher CAR – RBI Draft Guidelines for NBFC’s ; WILL Impact MFI’s
The draft guidelines have increased CAR of systemically-important non-deposit-taking NBFCs from 10% to 12% immediately, and to 15% by April 1, 2009. This would limit the way the NBFCs leverage their capital. Some experts say that with a 15% CAR, MFIs can leverage only up to five times.
The regulator’s concern was triggered because NBFCs raised short-term resources to fund their asset books.
So far, only deposit-taking NBFCs were subject to prudential regulations on income recognition, asset classification and provisioning capital adequacy, among others, while non-deposit-taking NBFCs were subject to minimal regulation. Most of the systemically-important NBFCs are those promoted by banks. There are 173 systemically-important non-deposit-taking NBFCs.
According to RBI, “In view of recent international developments, the risk associated with highly-leveraged borrowings and the reliance on short-term funds by some NBFCs, there have been concerns regarding the enhanced systemic risk associated with the activities of the entities.”
Non-deposit-taking NBFCs with an asset size of over Rs 100 crore would be considered NBFC-ND-SI, and a new regulatory framework involving prescription of capital adequacy and exposure norms for such NBFC-ND-SI was put in place from April 1, 2007. The companies were advised to maintain a minimum capital-to-risk weighted assets (CRAR) ratio of 10%.
INNOVATIVE INNOVITI HANDHELDS !
Mobile Banking Transaction in India – Operative Guidelines (First Draft – June08)
Click the following link to download the draft guidelines:- 84978-rbi-mobile-payment-operative-guidelines
An estimated 750 million households worldwide don’t have a bank account. In Mexico, cash transactions constitute 79% of payments. In India, 91%. In China, 82%. Even in the U.S., 80 million people are in the category of the under-banked.
The potential for mobile micropayment has attracted other entrepreneurs as well.
Infact The Reserve Bank of India’s panel on Thursday recommended that banks when they offer mobile payments service must ensure that customers having mobile phones of any network operator should be in a position to request for service.
Restriction, if any, to the customers of particular mobile operator may be only during the pilot phase, the RBI stated in a draft operating guidelines for mobile payments in India.
Long-term goal
The RBI panel recommended that banks should get the mobile payments scheme approved by their respective boards or local board (for foreign banks) before offering it to their customers.
The board approval must document the extent of operational and fraud risk assumed by the bank and the bank’s processes and policies designed to mitigate such risk.
Banks which have already started offering mobile payment service may review the position and comply to these guidelines within three months from the issuance of these guidelines, it stated.
The long-term goal of mobile payment framework in India, the RBI said, would be to enable funds transfer from an account in one bank to any other account in the same or any other bank on a real time basis irrespective of mobile network a customer has subscribed to.
This would require inter-operability between mobile payments service providers and banks and development of a host of message formats.
Banks may keep this objective while developing solution or entering into arrangements with mobile payments solution providers.
Infrastructure
To meet the long-term objective of a nation-wide mobile payment framework, a robust clearing and settlement infrastructure operating on a 24×7 basis would be necessary. Pending creation of such an infrastructure on a national basis, banks may enter in to multilateral arrangement and create mobile switches or inter-bank payment gateways with expressed permission from the RBI.
The RBI said that its guidelines on ‘Know Your Customer (KYC)’ and ‘Anti Money Laundering (AML)’ as prescribed by the RBI from time to time would be applicable to customers opting for mobile-based banking service. The RBI said that the services should be restricted to only to bank accounts and credit card accounts in India which are KYC and AML compliant and only Indian rupee-based services should be provided.
Registration
Banks should offer mobile-based banking service only to their own customers and banks should have a system of registration before commencing mobile-based payment service to a customer. Prior registration of the customers would be necessary irrespective of the type of service requested.
For the standard level service, one time registration should be done through a signed document.
The Big Trouble In Small Loans – Time
Interesting Article – Must Read, Click here to read the article in TIME
World’s Largest Microsavings Companies in India – Sahara / Peerless / Disari ????
Sahara India Financial Corporation (SIFCL) is the largest deposit-taking non-banking finance company (Deposit Base of Rs 18,000 Crores / 40 Million Clients) in the country. Apart from Sahara, there are two other RNBCs operating in India - the Kolkata-based Peerless General Finance and Investment Company and Disari India Savings and Credit Corporation.
The company has also been told to repay the existing deposits as and when they mature.
SIFCL, part of the highly influential Sahara group which has interests in mutual funds, insurance, real estate and media, has been found guilty of violating various regulatory norms.
According to a statement issued by RBI, on Wednesday, the violations include non-payment of minimum rate of interest prescribed for RNBCs (residuary non-banking company), non-maintenance of stipulated asset-liability match, violation of Know Your Customer norms for opening deposit accounts, not informing depositors in time about the maturity of their deposits, and non-repayment of deposits on maturity.
Currently, SIFCL, a residuary NBFC, has a huge deposit base of close to Rs 18,000 crore.
RBI has directed SIFCL to repay the deposits as and when they mature and not to treat non-payment of instalments under any running daily deposit or recurring deposit schemes by depositors as a default.
The company is also liable to pay the agreed rate of interest on the amounts actually held by it for the entire term of the deposit as if there was no default, RBI said.
RBI had earlier issued a show-cause notice to SIFCL on violation of various regulations. However, despite the warning, the company continued to violate the guidelines, RBI said.
An RNBC is a non-banking financial company that is wholly dependent on public deposits. Other NBFCs depend on market borrowings and bank finance also.
According to information from the company’s Web site, SIFCL, set up in 1987, has a depositor base of 4.25 core and 1,508 service centres.
CASHPOR MICRO CREDIT BREAKS EVEN/POSTS SURPLUS
India’s most exemplar pureplay MFI Cashpor Micro Credit has broken even for the FY ending March 2008.
Vinod Khosla (Ex. Sun Microsystems/KPCB/Khosla Ventures) has invested in Cashpor Micro Credit
Cashpor Micro Credit provides micro loans at ~13% Flat to women living below/on the poverty line as defined by the stringent Cashpor Housing Index.
Had lunch with Prof. David Gibbon, an almost iconic figure in the Microfinance Sector, a few days back where he detailed the route and the structural changes required in operations leading to a breaking even. I wish them all the best and hope to see Cashpor Micro Credit scale higher.
RBI moves to stop NBFCs` deposit mop-up / microsavings ?
Officials of various D-NBFCs said RBI had already held informal discussions and had been trying to impress upon them for at least three years now that they should reduce their dependence on public deposits. This meant whatever deposits NBFCs had already accepted so far should be repaid, said the managing director of a D-NBFC.
The impact will be felt mainly by residuary NBFCs (RNBFCs), which are finance companies that depend solely on public deposits. Three RNBFCs — Sahara India Financial Corporation, Peerless General Finance and Disari India Savings and Credit Corporation — accounted for 91.7 per cent of the Rs 24,665 crore deposits mobilised by 362 NBFCs.
Last year, RBI asked Lucknow-based Sahara and Kolkata-based Peerless to stop accepting public deposits by 2010. Whenever RBI changes the policy regarding D-NBFCs, the three RNBFCs will have to shift to different models, according to an executive of one of the companies.
According to a communique from Peerless General Finance Managing Director S K Roy, posted on the company’s website, “Despite our having a wide range of products in the RNBC category, it is difficult to sustain our growth on the basis of this business as its future is uncertain due to strict regulations. With this in mind, we have forayed into the FPD (financial products distribution) business.”
Peerless is already working towards converting itself into an FPD company. The company has entered into tie-ups for distributing mutual funds, insurance policies (life and non-life), loan products and credit cards.
It is also asking its depositors to use the deposit to buy various financial products. A Sahara spokesperson refused comment, while Disari executives could not be reached.
Excluding RNBFCs, for most NBFCs, 5 to 10 per cent of their total resources come from public deposits, which are declining in importance in the last three years, while other sources such as market borrowings and bank finance have assumed more importance.
The reason why public deposits have become less attractive for NBFCs vis-à-vis other sources such as bank finance and market borrowings is due to higher resource mobilisation costs. The deposit rate is high, in addititon to the various costs associated with retail deposits such as transaction cost, printing and stationery cost, servicing cost, making them an expensive source, an industry expert said.
With the asset-liability management also proving tough, several NBFCs have stopped raising deposits. For instance, Mahindra and Mahindra Financial Services has not raised public deposits during the last three years.
Fullerton India, which also has a licence to raise public deposits, has not been raising funds from the public. For Bajaj Auto Finance, only 5 per cent of the resources come from public deposits, while it is less than 10 per cent for Shriram Transport Finance.
Says Fali Hodiwalla, manager, KPMG Advisory Services, “RBI has been fairly consistent in reiterating that commercial banks should be the sole mobiliser of public deposits. This is because banks have more regulations in place, capital adequacy norms, the disclosure and prudential norms are more stringent and therefore are a much safer avenue for the public to park their deposits.”
Besides, deposits up to Rs 1 lakh in a bank is insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC), while deposits with NBFCs do not hold any such safety for a customer.
DhanaX Launched !!
Siva, a self motivated entrepreneur launched www.dhanax.com. A Online P2P lending aimed at income borrowers.
dhanaX(http://dhanax.com ) provides a stable platform through which individuals can directly lend to low income borrowers with the help of partner organizations. dhanaX thus effectively connects willing lenders with credible borrowers in need of credit to start their businesses.
dhanaX Web Technologies Pvt. Ltd., headquartered in Bangalore, is an innovative social lending enterprise. At dhanaX, the objective is to provide easy access to credit for the enterprising but underprivileged borrower and a profitable investment opportunity for the social lender. Founded by a team of highly dedicated individuals with relevant experience in financial services, management and technology, dhanaX envisions to create a stronger society by paving the way for an economic revolution driven by the community.
The power of microfinance to transform lives is what motivates and drives dhanaX in the endeavour. dhanaX draws inspiration from the entrepreneurial spirit of thousands of small farmers, underprivileged women and small business owners across the globe. In India, close to 70% of the population is dependant on micro-enterprises, small-scale farming and other small non-farming undertakings for a livelihood. Access to cheaper and quicker credit is vital for such entrepreneurs to power their enterprises. dhanaX aims at fulfilling just such a requirement supported by individuals who believe in investing in society they live in.
With research establishing that micro loans boast a 95% repayment rate worldwide, investors have every reason to consider social lending as an attractive investment vehicle. Empowering the community around you can be a rewarding experience. Not just emotionally but financially too. And dhanaX aims to prove just that.
Starship Enterprise – M2i
M2i - A 2 year old, truly promising, management consulting firm for MFI’s was recently covered by The Economic Times !
Click here to read the Economic Times writeup – Starship Enterprise.
Started by a team of highly motivated IRMA + Ex-Mcril Alumni, M2i has advised, mentored, trained ”several” MFI’s since inception. Website: www.m2iconsulting.com/.
Client List Sampler (source: ET): Rashtriya Grameen Vikas Nidhi (RGVN), Sa-Dhan, Development Alternatives, ESAF, Cashpor, BISWA, Nirmaan Bharati,Appropriate Technology India (ATI).
Bluechip Entrepreneurship @ Nirma Labs, AHD i.e ANAXEE TECHNOLOGIES
I was in Ahmadabad recently where i met Govind, a self confessed foodie and his wife Arti, the technology entrepreneur couple. Their venture Anaxee Technologies has been incubated at Nirma Labs.
They have developed a new biometric technology from scratch! I believe it shall have huge application in “Inclusive Development” including financial inclusion/micro-finance/remote banking.
Will keep you posted !
Report of the Committee on Financial Inclusion
The Report of the Committee on Financial Inclusion is finally out !! Please download it by clicking this link.
Background of the Report: The Government in June 2006, had constituted a Committee to prepare a strategy of ‘Financial Inclusion’. The Ten Member Committee, was constituted under the Chairmanship of Dr. C. Rangarajan, Chairman of the Economic Advisory Council to the Prime Minister. The terms of reference of the Committee included:
i) To study the pattern of exclusion from access to financial services disaggregated by region, gender and occupational structure.
ii) To identify the barriers confronted by vulnerable groups in accessing credit and financial services, including supply demand and institutional constraints.
iii) To review the international experience in implementing policies for financial inclusion and examine their relevance/applicability to India.
iv) To suggest
- strategy to extend financial services to small and marginal farmers and other vulnerable groups, including measures to streamline and simplify procedures, reduce transaction costs and make the operations transparent.
- measures including institutional changes to be undertaken by the financial sector to implement the proposed strategy of financial inclusion.
- a monitoring mechanism to assess the quality and quantum of financial inclusion including indicators for assessing progress.
Government had been concerned that despite the vast expansion, modernization and diversification of ownership of financial institutions, a large number of vulnerable groups remain excluded from the opportunities and services provided by the financial sector. Such excluded groups include women, small and marginal farmers, people in the unorganized sector, the self employed and the pensioners. Government was anxious to correct this situation and extend the reach of the financial sector to such vulnerable group by minimizing, if not eliminating, the formal and informal barriers to access encountered by such groups.
The members of the Committee were Shri Vinod Rai, Special Secretary, Ministry of Finance, Dr. (Ms.) Rohini Nayyar, Adviser, Rural Development, Shri M.B.N. Rao, CMD, Canara Bank, Shri Yogesh Agarwal, MD, State Bank of Patiala, Prof. Mahinder Dev, Director, Centre for Economic and Social Studies, Hyderabad, Shri Vijay Mahajan, CEO, BASIX, Shri R. Gopalkrishnan, ED, TATA Sons, Shri A.P. Fernandes, Director, MYRADA and Dr. Y.S.P. Thorat, Chairman, NABARD.(PIB)
RANGDE.ORG Launched, As promised, On 26th January 2008.
RangDe.Org has been launched today. I had met the founders, Smita and Ram, both highly motivated and wanting to make a difference. They want to reduce the rate of interest to the final consumer. They have a point.
The solution is www.RangDe.org , an online P2P lending platform like KIVA.
Best Wishes to Smita and Ram !!
Microfinance Passport Launched !
Serial Social Innovator and Foodie, Shivendra Sharma, (Ex – MD Planet Finance India, who gave to the microfinance sector The MPEA Awards, The Small Change Magazine has yet again delivered by launching the world’s first distance learning program in Microfinance i.e Microfinance Passport. Targeted at those inspired by microfinance, whether as practitioners, entrepreneurs, banking or finance professionals, researchers, students, career seekers or investors, it offers an opportunity to master the basics as well as the nuances of this nascent industry.
Deutsche Bank – Microfinance – An Emerging Business Opportunity
Deutsche Bank – Microfinance – An Emerging Business Opportunity - Click to Download.
Must Read, Informative, Useful and Interesting Report !!
Background: The report examines the attractiveness of microfinance for private sector investors. The report represents one of the first formal research paper on microfinance investments produced by a major financial institution. The study suggests that microfinance will evolve into a niche investment product that will increasingly attract both retail and institutional investors. Microfinance is also said to benefit from a further strong rise in socially responsible investments and to increasingly appeal to a wider range of commercial investors. As a result, the study forecasts individual and institutional investments to rise to USD 20 billion by 2015.
India Financial Sector Technology – Vision 2010
The Reserve Bank of India on Friday had placed on its website the revised draft Financial Sector Technology Vision (2008-10) for public comments.
Download the document for your reference. Interesting Read !!
DB Online P2P Lending – Interesting Report
Good Report by DB Research on Online P2P Lending. Click to download the DB Research Report – Online P2P Lending
Microfinance Bill
The new microfinance law is underway, with the Union Cabinet on Friday clearing the bill despite an opposition from some official quarters citing lacunae in it. The bill will be tabled in the current session of Parliament.
The bill for microfinance will empower the National Bank for Rural and Agricultural Development (Nabard) to regulate the microfinance sector in India. While microfinance institutions, operating in the form of trusts, societies and co-operatives will now come under Nabard, non-bank finance companies have been kept out of the ambit. Significantly, the minimum capital required has been fixed at as low as Rs 1 lakh.
According to the bill, MFIs operating as co-operatives, trusts and societies need to register under the Microfinance Development Council (MDC), which will be a Nabard-promoted entity. It will permit MFIs to raise savings, but they will have to take specific approvals from the council after registration to be able to raise savings. The minimum capital requirement has been capped at Rs 1 lakh, with promoters of such MFIs having to contribute, at least, 50% of this amount.
Other provisions include the appointment of a microfinance ombudsman to cater to the redressal of grievances arising from the participants of the sector. This apart, it is likely that the microfinance development fund, announced in the last budget, may now be made the centralised recipient of the grants received by MFIs, mainly from overseas institutions.
Business Correspondent & Facilitators
The RBI has come up with a brilliant provision for enabling banks to appoint certain entities as their Business Correspondent & Facilitators
CLICK HERE to go to the circular.
