We have no solution for MFIs who have been hit: RBI

RBI Deputy Governor K C Chakrabarty said MFIs are in the business of taking money and giving loans and if people do not pay back, RBI has no solution for it.

"People have to pay back money to the lender who has given the money.If they don't pay back, we have no solution," he told reporters in response to questions after inaugurating "Grameena Vikas Kendra" (branchless banking unit) of Corporation Bank at Mallohalli in the Bangalore district.

He said people (MFIs) must first make people credit worthy before lending, should not "exploit" those who take loans, "should not charge that much high rate that people are not able to repay the money", must do due deligence and should not lend more than their customers can absorb.

"They (MFIs) should bring good lending practices to the fore, then only it (their business model) will work."

He said there are already RBI regulations governing non-banking financial institutions and MFIs, adding, if there are any "grey areas", the Malegam Committee would examine and come out with recommendations.

MFIs had been badly hit due to the freeze on lending by banks.

Asked if the RBI would ask MFIs to reduce interest rates, Chakrabarty said: "In a competitive environment, pricing comes out of competition. I cannot force a person to reduce the price."

Earlier addressing the function, he said 72,000 villages with a population of more than 2,000 in the country are aimed to be covered under banking services by March-end.