Microfinance News Digest

Priority sector lending status withdrawn for Gold Loan NBFC’s – News Digest 1

Today will be the first installment of weekly news digest that we have introduced. The News Digest comprises of news summaries, press releases and important statements related to microfinance, banking, financial services and financial inclusion in India.

gold loan priority sector loans

RBI clarifies stand on gold loan move
High interest rate and lack of clarity on end use of funds was the primary reason behind the regulator asking banks not to classify loans to non-banking finance companies (NBFCs) for on-lending against gold jewellery as priority sector lending. BS

Loans Against Gold more expensive than Personal Loans

As non-banking finance companies (NBFCs) that offer loans against gold are vying for new business, many of them have projected the product to be a better alternative than a personal loan. A personal loan can score over a loan against gold in some cases, if you compare the interest rate, tenure and charges for the two products. Rediff.com

SKS Microfinance threatens exit from Andhra

SKS Microfinance may consider pulling out of Andhra Pradesh if the state government does not revoke its recent restrictive legislation on microfinance institutions (MFIs) by April 1.BS

Andhra unmoved by SKS warning
A day after SKS Microfinance’s warning that it might pull out of Andhra Pradesh, the state government said it would not make any changes in the contentious Micro Finance Institutions (Regulation of Money Lending) Act. BS

Paving Way for Consolidation of MFI Monopolies – CPI(Marxist) comments on Malegam Report
THE much awaited report of the Malegam panel on microfinance institutions (MFIs), appointed by the Reserve Bank of India (RBI), has shattered the hope of all those who thought microfinance was a vehicle of financial inclusion. PD

Returned with no thanks?
Microcredit was once extolled by world leaders like Bill Clinton and Tony Blair as a powerful tool that could help eliminate poverty, through loans as small as Rs 2,300 to cowherds, basket weavers and other poor people for starting or expanding businesses. But now microloans have sparked political hostility in Bangladesh, India, Nicaragua and other developing countries.HBL

Cental Microfinance Bill could be stalled
The proposed Microfinance Bill may not see the light of day, as the finance ministry is having second thoughts on coming out with legislation to regulate the sector. This comes in the backdrop of recommendations by the Malegam committee, which said the Bill would cover only about 8 per cent of the outstanding microfinance loan portfolio. BS

Indian microfin cos follow lower-cost model than B’desh: study
Microfinance companies in India adopt a comparatively low-cost model of operation than their counterparts in markets like Bangladesh and Mexico, a study on the sector said today.BS

Total biz to cross Rs 1.5 lakh cr by fiscal-end: Nabard
The National Bank for Agriculture and Rural Development (Nabard) today said its total business size would cross Rs 1.50 lakh crore by the end of current fiscal with lending for rural infrastructure constituting bulk of total business mix.BS

Nabard to stream micro credit through grassroot groups
The National Bank for Agriculture and Rurual Development (NABARD) will pay greater focus on financing through ‘Joint Liability Groups’ (JLs) in Kerala as it is found more effective way of priority sector lending. TOI

NBFCs look at new fund sources to protect margins
With cost of funds seeing a sharp rise, non-banking financial companies (NBFCs) are adopting different strategies to protect margins. They are preferring fixed interest rates over floating rates.BS

Soon, NSEL e-gold units can be exchanged for jewellery
Retail investors can soon exchange their e-gold (electronic-gold) units issued by National Spot Exchange Ltd (NSEL) with jewellers across the country. The exchange plans to launch the scheme from March and hopes to empanel around 10,000 jewellers in the country for this. HBL

Case for a national gold bank
India owns over 18,000 tonnes of above ground gold stocks worth around $800 billion, almost 11 per cent of the global stock, according to the World Gold Council (WGC) estimates.This is equivalent to nearly half an ounce of gold ownership per capita, a figure which is significantly below consumption in Western markets, representing scope for more growth, says a WGC research paper ‘India: Heart of Gold’. HBL

A bulging microfinance pocket
It is evident from a report that appeared in The Economic Times a few days back and another, which is being run in Mint, that the chief executives of microfinance companies get paid a lot of money (it would be accurate to say that in most of these cases, they pay themselves a lot of money). LM

Rural consumers getting vocal against bad banking services
The annual report of the Indian central bank’s banking ombudsman office says complaints from rural areas constituted 32% of the total 79,266 complaints received in 2009-10. LM

One bank branch in 72,000 villages by 2012: Pranab
Pranab reminded the farmers that if they repay loans in time, they will have to pay only 5% interest, whereas the normal rate is 7%. LM

UBI to extend services to 1,880 un-banked villages
The United Bank of India (UBI) has decided to extend its services to 1,880 un-banked villages with a population of over 2,000 in 85 districts of 12 states and one Union Territory by March 31. BS

Banks to monitor MFIs more closely
Banks are set to play a bigger role in the oversight of microfinance institutions, or MFIs, especially those operating in Andhra Pradesh, and will even monitor their daily cash flow management because of the high risk they face in lending to microlenders. LM

PFRDA Bill likely in next session
Legislation to create a statutory pension regulator and allow up to 49% foreign investment in pension fund management companies is likely to be introduced in the forthcoming budget session of Parliament. LM

How to make bank loans more costly
The best way to fight high inflation is to make money more expensive and dampen demand for it. Indian banking industry’s loan book has grown by 23.6% in the past one year against RBI’s year-end projection of 20%. LM

Deposits shrink by Rs 26,000 Crore
After surging around Rs 2 lakh crore in the last fortnight of December, bank deposits fell Rs 25,742 crore during the 14-day period ended January 14. BS

MFIs want 12-18 months to comply with rate cap
Small and mid-sized microfinance institutions (MFIs) are likely to seek more time to comply with the recommendations of the Malegam Committee report. BS

Personal loans clock 13.4 per cent growth
The personal loans segment recorded a 13.4 per cent growth year-on-year in December 2010, after it had seen a decline of 0.4 per cent last year.BS

IndiaFirst to introduce health, pension products next fiscal
IndiaFirst Life Insurance, jointly promoted by Bank of Baroda, Andhra Bank and Legal & General, is planning to introduce health and pension products before March. The JV is also proposing to enter the microinsurance business in the first quarter of next fiscal.BS

Banks set up core team for MFI loans restructuring
Bankers, under the Indian Banks Association (IBA), have set up core team of lenders to decide on the restructuring loans to micro-finance institutions (MFIs). TOI

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