As the government proposes to bring all micro finance institutions (MFIs) under the ambit of the Reserve Bank (RBI), Deputy Governor KC Chakrabarty today said that the central bank needs to get equipped for the regulatory work.
“We are not saying that we are not capable,” Chakrabarty said when asked whether RBI is capable to regulate the MFIs, adding, “If we were not equipped we will have to get equipped. If we are not capable, we have to get capable. The issue is that the job has to be done.”
However, he did not explain how the RBI needs to be get equipped as the bill has to yet to be approved by the parliament.The draft of The Micro Finance Institutions (Development and Regulation) Bill seeks to make it mandatory for all micro finance institutions to be registered with the Reserve Bank, making it the sector regulator. It proposes to empower RBI to issue directions to MFIs on margin caps, tenure of loans, periodicity of repayment schedules, levy of processing fees, interest and life insurance premium, among others.
The earlier Bill of 2007 had sought to regulate only those MFIs not under the ambit of any law. The Bill lapsed as the term of 14th Lok Sabha which expired in 2009.
Commenting on the bank's apprehensions about increase in non-performing assets (NPA) in a rising interest rate regime, Chakrabarty said, “When the interest rate is high, probability of NPA always goes up, because the burden goes up.”
Speaking on RBI's role to curb inflation, he said, “Immediately we are looking at bringing down the inflation at 6-7 per cent. Our medium term projection is 4-5 per cent but on a longer term it should come down to anywhere between 3-4 per cent.” The WPI level had reached 9.44 per cent in June 2011.
Chakraborty also hinted at the probability of another rate hike in September. “Probability of another rate hike is always there,” he added..