Microfinance Focus May 3, 2011: In his Monetary Policy Statement for 2011-12, Governor Dr. D. Subbarao of the Reserve Bank of India said that the RBI accepted the framework of regulations by the Malegam committee.

The governor Dr. D. Subbarao said, “The Reserve Bank has broadly accepted the framework of regulations recommended by the Malegam committee. We have however adjusted some of the parameters recommended by the Committee.”

He added, “Bank loans to all MFIs, including NBFCs working as MFIs on or after April 1, 2011, will be eligible for classification as priority sector loans if, and only if, they conform to the regulations formulated by the Reserve Bank.  As recommended by the Malegam Committee, the Reserve Bank has also decided to appoint a Committee to review the priority sector lending classification.”

The Sub-Committee had earlier recommended creation of a separate category of NBFCs operating in the microfinance sector to be designated as NBFC-MFIs. To qualify as a NBFC-MFI, the Sub-Committee has stated that the NBFC should be “a company which provides financial services pre-dominantly to low-income borrowers, with loans of small amounts, for short-terms, on unsecured basis, mainly for income-generating activities, with repayment schedules which are more frequent than those normally stipulated by commercial banks” and which further satisfies the regulations specified in that behalf.