Financial Daily from THE HINDU group of publications
Friday, Aug 05, 2005
Financial Daily from THE HINDU group of publications Friday, Aug 05, 2005 |
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Money & Banking
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RBI & Other Central Banks RBI for rating micro-finance bodies Our Bureau
The Chief General Manager of RBI, Ms Deepali Panth Joshi, walks in as the Executive Director of Sa-Dhan, Mr Mathew Titus, addresses the inaugural session of the national conference on micro-finance in Hyderabad on Thursday. — Mohammed Yousuf
Hyderabad , Aug. 4 THE Reserve Bank of India (RBI) favours introduction of a system for rating micro-finance institutions (MFIs) by credible rating agencies across the country. According to the banking regulator, the need is felt especially in the backdrop of the Government's decision to enable MFIs have access to various funds. The Finance Minister had, in the Budget, announced redesigning the Micro Finance Development Fund (MFDF) as `Micro Finance Development and Equity Fund' (MFDEF) with an increased corpus of Rs 200 crore. According to the RBI Deputy Governor, Mr V. Leeladhar, the MFIs would now have access to the fund to meet their equity requirements. Steps were under way to operationalise the fund. Further, NGOs engaged in micro-finance activities were permitted to raise external commercial borrowings (ECBs) up to $5 million during a financial year for permitted end-use under Automatic Route. "Access to various funds, of course, brings in the issue of rating. The rating of the MFIs by credible rating agencies would make the banks comfortable in dealing with them. There is thus an urgent need to have appropriate rating agencies," Mr Leeladhar said. His message was read out by the RBI Chief General Manager, Ms Deepali Panth Joshi, here on Thursday at the daylong workshop on "Mainstreaming Micro-finance: Implications and Challenges" organised by Sa-Dhan, the Association of Community Development Finance Institutions. Though RBI, being a formal regulator, is not interested in tightening its grip on the informal sector of micro-finance, it is keen on ensuring that the savings of the poor were safe since savings also form a part of the services offered by the microfinance providers. According to Mr Leeladhar, the success of the self-help groups in raising their corpus through thrift is the underlying trust that each member of the group has in other members. Most of the poor would be first time savers and it need to be ensured that their interests are protected. Referring to the Union Budget that makes the commercial banks to appoint MFIs as banking correspondents, the Deputy Governor said an Internal Working Group constituted by the banking regulator has extensively studied the area and came out with two models. The report of the Internal Working Group is currently being examined. "It has to be seen whether the MFIs would be successful as correspondents of banks and the type of activities these correspondents would have to handle. "If the models are to be accepted, banks would have to engage correspondents based on the track record and rating of MFIs," Mr Leeladhar said.
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