 "Hit by currency purge, MFIs to go cashless")
With the daily operations of microfinance institutions (MFIs) coming to a halt on account of demonetisation, the sector is looking to go cashless. Replacing the system of disbursements recovery in cash, MFIs are planning to route the transactions through bank accounts. The first ones planning to go digital are the proposed small finance banks (SFBs). Almost all of the proposed SFBs are expected to be launched in the next quarter.
According to Reserve Bank of India norms, SFBs are required to be operational by April 2017. At least two SFBs — Suryoday Micro Finance and Utkarsh Micro Finance — are planning to launch their banks in January 2017.
“We’re keeping a flexible launch date,” said R Baskar Babu, chief executive officer (CEO), Suryoday Micro Finance. Suryoday has already rolled out cashless system of transactions on a pilot basis in Pune.
Varanasi-based Utkarsh Micro Finance was planning to route all microfinance transactions through banks after graduating into an SFB in the long run. However, now the MFI is looking to implement the plan ahead of schedule.
“We’re planning a soft launch on January 14,” said Govind Singh, managing director, Utkarsh Micro Finance. Rough estimates suggest that disbursements worth Rs 250 crore and collections worth Rs 200 crore are undertaken entirely in cash in the MFI sector on a daily basis, says Ratna Vishwanathan, CEO of Microfinance Institutions Network.
Between November 9 and 18, the sector was due to collect Rs 2,100 crore. Against this, the MFIs could collect about half or about Rs 1,100 crore dues.
