Chandigarh, November 29, 2013: The release of SRO guidelines for NBFC-MFIs is a major milestone in the evolution of microfinance sector in India. These guidelines will lead to the creation of a layered regulatory framework which will make for a good balance between core regulatory drivers and the developmental needs of the industry.
Structurally, and functionally, MFIN has been acting as the de-facto SRO for its members. Towards this end, MFIN has taken a number of significant initiatives such as a stringent industry code of conduct, establishment of a high powered Enforcement Committee with external members, development of a full scale credit bureau ecosystem and promotion of transparency through quarterly publication of industry reports.
According to RBI norms released on Tuesday, an SRO must have at least one-third of the NBFC-MFIs as its members and adequate capital to be able to discharge its functions without being overly dependent on its member. MFIN has 42 members that make up 85-90% of the industry and also has requisite capital to meet the stipulated norms set by the RBI.
Commenting on this, Alok Prasad, CEO, MFIN said, “MFIN strongly welcomes the issue of the SRO guidelines for the Microfinance industry. These guidelines will substantially aid the process of improved governance and grievance redressal, within a well defined framework. Over the past 3 years or so, MFIN has been acting as the de- facto SRO and we now look forward to getting formal recognition by the RBI, under the guidelines issued today”. Speaking about MFIN’s vision, he said, “Our aim is to promote the robust development of the Microfinance sector by facilitating access to finance by millions of our un-served/underserved citizens.”
While membership of a SRO has not been made mandatory, the RBI has advised all NBFC-MFIs to voluntarily become members of at least one SRO. The SRO holding recognition from the Reserve Bank will have to adhere to a set of functions and responsibilities, such as formulating and administering a Code of Conduct recognized by the Bank, having a grievance and dispute redressal mechanism for the clients of NBFC-MFIs, responsibility of ensuring borrower protection and education, monitoring compliance by NBFC-MFIs with the regulatory framework put in place by the Reserve Bank, surveillance of the microfinance sector, training and awareness programmes for the members, Self Help Groups, etc and submission of its financials, including Annual Report, to the Reserve Bank.
About Microfinance Institutions Network
Microfinance Institutions Network (MFIN) is the premier industry association for the microfinance industry in India and its current membership consists of 42 leading NBFC (Non-banking Financial Company) Microfinance Institutions (MFIs) in the country. The aggregate business of MFIN members constitutes over 85 per cent of the Indian microfinance industry (excluding SHGs). MFIN seeks to work closely with regulators and other key stakeholders to achieve larger financial inclusions goals through microfinance.