Money & Banking

Bank funds start to trickle into MFIs

Anjana Chandramouly Bangalore | Updated on March 12, 2018

Bank funds have started flowing into microfinance institutions (MFIs), albeit slowly and in small amounts. The rider: compliance of regulatory requirements and reliance on credit bureau for customer data.

At least two MFIs that Business Line spoke to said that they have received bank funds in August and September.

“In August, we received Rs 100 crore from both public and private sector banks; and in September Rs 25 crore from another PSU bank,” said Mr Samit Ghosh, CEO and Managing Director, Ujjivan Financial Services.

“Slowly, funds have started coming in.”

To get bank funding, MFIs are now required to be fully compliant with the RBI regulations and also Malegam Committee recommendations. “For instance, we have to get a chartered accountant's certificate for compliance of regulatory requirements,” said Mr Suresh Krishna, Managing Director, Grameen Financial Services. Besides, microfinance institutions also need to ascertain the credit worthiness of the customer from the credit bureau.

Credit bureau

Mr Ghosh said that major microfinance institutions in northern and southern India have submitted their client data to High Mark, the credit bureau set up for MFI customers. “We can clearly see if customers have defaulted earlier or have borrowed over Rs 50,000,” he said, adding that MFIs now take credit decisions using this data.

Grameen Financial Services also received bank funding recently. “Some of the banks have started giving sanctions, though the amounts are small,” said Mr Krishna.

Published on September 12, 2011

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