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Microfinance Industry
Aimed at protecting borrowers from harassment by microfinance institutions (MFIs), the Karnataka government has drafted an ordinance, with penal provisions, including a jail term up to ten years, and fine as high as Rs five lakh for violation. Confirming this, State Home Minister G Parameshwara on Tuesday said, the Karnataka Micro Finance (Prevention of Coercive Actions) Ordinance 2025 has been sent to Governor Thaawarchand Gehlot for his assent. "It was three years (in initial draft), now we have increased it. Fine has also been increased to five lakh. This is to ensure that the heat of the law is felt (by violators). If a law is made with perfunctoriness just like that, such incidents won't stop. Hence, the fine (amount) and imprisonment (period) has been increased, so that it in a way, becomes a deterrent," Parameshwara said, responding to a question about punishment being increased to ten years imprisonment. Speaking to reporters here, he said, "The Governor was out of town, and
The Microfinance Industry Network (MFIN) on Thursday dismissed reports about alleged harassment by microfinance companies in the state, claiming that a small section of "ill-informed" individuals with the aid of unauthorised entities were indulging in "unscrupulous" rumourmongering. Recently, various organisations also staged protests in different parts of the state condemning the atrocities and oppression carried out by microfinance companies and demanded action against them. "The recent reports of protests against MFIs are from a small section of "ill-informed" individuals with the aid of unauthorised entities, indulging in unscrupulous rumourmongering," Rama Kamaraju, Head, State Initiatives, MFIN said in a press conference here. The MFIN is a Self-Regulatory Organisation recognised by RBI and the Association of Karnataka Microfinance Institutions. "We wish to assure you all that we follow a very well calibrated advisory approach and have our eye on the ball at all times," he ..
Microlending outstandings in the system reduced 4.3 per cent to Rs 4.14 lakh crore in the September quarter as lenders adopted a cautious stance amid deteriorating asset quality, a report said on Wednesday. Loans unpaid for 1-30 days increased to 2.1 per cent from the 1.2 per cent in June, while the ones unpaid for 31-180 days witnessed a sharper rise at 4.3 per cent as against 2.7 per cent in June, credit information company Crif High Mark said. The microlending universe is facing multiple headwinds for the past several months, and the regulator has blamed industry practices, including multiple lending to the same borrower by different entities and charging usurious interest rates with a view to expand profits as among the problems. The last few months have seen a drop in collection efficiencies, and the industry has swung into action with corrective steps that are leading to a dip in the overall outstandings. Data from the credit information company said only non-banking financia
Finance Ministry will hold a meeting with microfinance institutions (MFIs) on Wednesday amid rising bad loans and delinquencies across all types of lenders in the sector. According to sources, the Department of Financial Services Secretary is likely to chair the meeting with senior officials of MFIs here. The meeting assumes significance as it comes with the sector showing signs of stress and rising delinquencies. Credit to the microfinance sector by banks (including SFBs), NBFC-MFIs and other NBFCs has decelerated during the current financial year so far after witnessing rapid growth during the last three years, according to a latest report of the Reserve Bank. "The microfinance sector is showing signs of stress, with rising delinquencies across all types of lenders and ticket sizes. During H1:2024-25, share of stressed assets increased, with 31-180 days past due (dpd) rising from 2.15 per cent in March 2024 to 4.30 per cent in September 2024," said the RBI's Financial Stability .
After repeated strictures from the Reserve Bank on the industry's practices, the Microfinance Institutions Network (MFIN) on Monday announced a slew of changes to make lending to the bottom of the pyramid more "responsible". From January 1, the self-regulatory organisation's members will ensure that a single MFI client's borrowings are limited to three MFIs as against four at present and the total indebtedness of a borrower including MFI and unsecured retail loans is capped at Rs 2 lakh, a statement said. The body's chief executive and director Alok Misra hoped that the sector will become "more resilient" with the new measures. Over the last few months, the RBI has gone public with its concerns on a slew of practices adopted by the MFIs, including usurious high interest rates, multiple lendings to single borrowers and even practices like not crediting loan repayments to the rightful accounts despite being paid by borrowers. On October 21, the RBI also asked four entities including