Debt norms for MFIs eased

Debt norms for MFIs eased

RBIs move is aimed at providing liquidity support for the sector

Attributing the current problems of the MFI sector to external factors the RBI said, the temporary measures being announced by the central bank would help in providing liquidity support to the MFIs.

Under the new norms, which will remain effective till March 31, 2011, banks would be allowed to treat the advances to MFIs as good assets even if such loans are not fully secured. The decision would allow banks to restructure loans provided to the MFIs.

The RBI decision follow a meeting called by it last month to assess the problem of the microfinance sector in Andhra Pradesh and other states and to deal with the situation. Earlier Indian Banks’ Association (IBA) urged the RBI to relax the debt restructuring guidelines for the MFI sector.

The Reserve Bank regulates only those MFIs which are registered with it as non-banking finance companies (NBFCs). However, it does not prescribe lending rates for these institutions.