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DripFin means Drip Finance ala Drip Irrigation (i.e. small scientific value added productive measures)

Archive for Microfinance Bill

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.

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