The days of regulatory forbearance vis-à-vis non-performing assets (NPAs) are over and the micro-finance sector has to grow on the basis of its own strength, according to Reserve Bank of India Deputy Governor NS Vishwanathan.

“One of the things that we are being requested by the MFI sector is to kind of recognise the issue of NPAs in the recent past. …It is not that everybody faces the same extent of problem.

“So, I think, in the same situation there are some entities that have a lower default as opposed to others,” he said at a function to release MFIN’s Mutually Agreed Code of Conduct for micro-credit providers.

While the regulated entities can always ask for forbearance, Vishwanathan underscored that the fundamental thing that this leads to is a question of introspection as well: “As to what have we done, have we done the right thing, have we overstretched, have we extended beyond what was required because the impact is not uniform?

“The days of regulatory forbearances are over. I don’t think we are looking at any kind of regulatory forbearance. If there is capital erosion, the capital has to be met by the capital providers,” he said.

In terms of stabilisation of the sector, the Deputy Governor observed that there is fair amount of stability.

“But I don’t think we have reached a stage where we can say that all the people who can be targeted by MFIs today have been targeted….,” he said

Whatever changes the RBI will make in the sector will not be on the basis of forbearance, the Deputy Governor said and added that MFIs must learn to work on their strengths.

“Being strong is very important. Growth on the basis of strength is very important rather than seeking a concession here and a concession there…Responsible financing on the one hand and responsible availing of credit on the other hand will enable both the stakeholders to grow.”

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