Micro-finance institutions cannot accept public deposits

Mumbai: The reserve Bank of India (RBI) Governor Dr Y.V. Reddy has said that micro finance institutions will not be allowed to accept public deposits as it puts public money at risk. This is going by the recent experience of urban co-operative banks in the country.

Dr Reddy was speaking at the Indira Gandhi Institute of Development Research yesterday.

Regarding restructuring of banks, FIs and non-banking finance companies, he Reddy said that all aspects, including legal, policy matters and interest of shareholders should be taken into account. He also expressed RBI's willingness to assist the Government on the issue if need be.

On litigation for debt recovery, he pointed out that it was proving difficult to make a "reasonable assessment of probability of default'' with the prevailing uncertainty to get a prompt judgement from the judicial system and implement the same. "I would perhaps put a high priority to the whole issue of judicial process, he added.

On the implementation of Basel II norms, he said the Indian banking sector was committed to implement best practices "but at a pace suitable to the situation here."