Banks and microfinance institutions (MFIs), which are eagerly waiting for the implementation of the Malegam report by the Reserve Bank of India (RBI), will have to wait till May 2 when the central bank will announce its annual credit and monetary policy.
It was expected that RBI will announce the implementation of the report in April first week. ?RBI will make announcements on Malegam panel in the credit policy,? sources at RBI said.
In October 2010, RBI constituted the Malegam Committee to study the state of MFIs in the country. The committee, which submitted its report on January 19, suggested among other things capping interest rate at 24% for MFI loans.
The committee also suggested that small loans cannot exceed the Rs 25,000 ceiling and asked for creation of a separate category of non-banking financial companies (NBFC-MFI) for the MFI sector.
Finance minister Pranab Mukherjee in his Budget 2011-12 had announced creation of an equity fund of R100 crore for MFIs, which would help the cash-strapped sector to continue lending to small borrowers.
Dalli Raj, CFO, SKS Microfinance, said, ?We think it is a very positive report for the sector. First, it brings in regulatory clarity and it says that the RBI will act as a sole regulator for the sector.? Raj further said the implementation of the report would ensure in funding certainty, because it had reinstated priority sector status for the bank loans to MFIs.
Finally, the report called for the withdrawal of Andhra Pradesh MFI Act.
?SKS has not asked for any kind of restructuring of exposure of banks to the company as we have go a strong networth of R1,850 crore and our exposure to the state of Andhra Pradesh was only 25% of our total loan portfolio. Still, our concern being that banks must start funding to the sector in a big way so that it results in augmenting the credit flow from the banks to the MFI sector,?? he said.
However the microfinance industry, which of late has witnessed slowdown in business said banks are shying away from advancing loans to them.