'Govt must allow micro-finance institutions to resume'

Govt should allow micro-finance institutions to resume operations in green zones: Official  

Representative image. (Credit: iStockPhoto)

The government should allow micro-finance institutions to resume operations in the areas identified as green zones in strict adherence to social distancing and other safety norms, a top official of the sector said on Wednesday.

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The move will be of help as MFIs need to personally meet the borrowers, he said.

MFIs have been hit hard by the COVID-19 pandemic, with many finding it difficult to meet the operating costs and pay salaries during the ongoing lockdown.

"We are looking for credit guarantee for loans, and also urge the government to pick up equity in small and medium companies. We are going to make a representation to the finance ministry in this regard," CEO of Micro-finance Institutions Network (MFIN) Harsh Srivastava said.

P Satish, executive director of 'Sa-dhan', a self regulatory body of MFIs, said the sector is worried about restart of operations, and if the situation does not improve by mid-May, many small units will have to shut shop.

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"We have urged the government to pay salaries and meet the operating costs of small MFIs during the lockdown period," Satish said.

A small MFI is one with an asset base of less than Rs 200 crore.

Since the middle of March, all operations of MFIs have come to a halt.

Satish said the MFI industry has urged the RBI to make the three-month moratorium on loan repayment applicable to the sector, too

"It is sad that the RBI moratorium extended to borrowers of the banks has not been passed on to the MFI industry," he said.

"We are given to understand that the finance ministry has asked SIDBI to extend the moratorium to MFIs," Satish added.

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