RBI not in favour of MFIs accepting public deposits

RBI deputy governor Anand Sinha today indicated the central bank was not in favour of micro-finance institutions (MFIs) soliciting deposits from the public.

"After all, whatever legislation passes, we have to work with that. But, RBI's position has been that deposit-taking should be limited to banks," he said responding to a reporter's question on whether MFIs should be allowed to take small deposits.
Sinha was speaking to reporters on the sidelines of a workshop on `Strengthening Microfinance Institutions' (MFIs) in Mumbai.

The draft Micro Finance Institutions (Development and Regulation) Act, 2011 circulated for public comments by the finance ministry contains a provision under which MFIs can collect small savings from Self Help Groups (SHGs) known as thrift.

Finance minister Pranab Mukherjee in his budget speech announced that government proposed to introduce the bill in the ongoing budget session.

Earlier, in March 2007, the government had introduced a Micro Financial Sector Bill in the lower house of parliament, which lapsed with the ending of the term of the 14th Lok Sabha in 2009.

Sinha further said that MFIs would have to take care of a number of issues like concentration risk, reduction of operational costs and corporate governance to overcome problems of the fledgling industry.