The RBI on Thursday met bankers to assess the exposure of the banking system to micro finance institutions in Andhra Pradesh. The banking sector has an exposure of little over Rs15,000 crore to the micro finance sector of which about 30 to 35% of this lending is to MFIs in AP.
The RBI representative present at the meeting assured bankers that they would look into how they would be able to direct the MFI sector. MFIs have been criticised for the high interest rates charged by them. However, bankers told RBI said if the MFI did not charge 22% interest rate,they would not be profitable. Majority of MFI’s operating in AP charge an interest of about 23.5%, bankers told the RBI.
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