While microfinance is present in almost all nooks and corners of the country, in terms of geographical distribution, 82 per cent of the loan portfolio is concentrated in ten States, according to M Rajeshwar Rao, Deputy Governor, Reserve Bank of India

“In terms of regional distribution, eastern and north-eastern regions of the country have the largest share at 37 per cent followed by the south at 27 percent and west at 15 per cent. Thus, in impacting lives and livelihoods, the role of microfinance continues to be important.......Hopefully, going forward the spread could be diversified.,” Rao said at the launch of MFIN’s India Microfinance Review in Mumbai

Tech adoption

He said going forward, there is a strong case for the adoption of technology in the microfinance sector to not only improve efficiencies and bring down operational costs but to also mitigate operational risks such as frauds, enhance service experience and create customer awareness. Leveraging digital solutions can enable the microfinance lenders to increase their productivity manifold across the entire lending cycle.

Consumer protection

In his speech, Rao elaborated that the RBI has attempted to move from a rule-based to a principle-based approach while regulating microfinance institutions. This has created an enabling environment for more financial institutions to serve the excluded while protecting their interests through competition and transparency, he said.

Consumer protection “has been our guiding light while revamping the regulatory regime for the microfinance sector”, he said

“To ensure borrowers’ protection from coercive recovery practices, the new framework also requires putting in place a mechanism for engagement with borrowers facing repayment related difficulties, prohibition on harsh recovery practices, extensive due diligence process for engagement of recovery agents and a dedicated mechanism for redressal of recovery related grievances,” Rao added

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