RBI decisions and views on the Microfinance Sector – Business & Economy News Digest

MFIs can’t bring about financial inclusion claims RBI Official
Microfinance institutions will not be able to bring about financial inclusion, as their cost of lending is high, a top RBI official said on Thursday.

“Microfinance institutions will not be able to bring financial inclusion. Their cost of lending is high,” Reserve Bank of India Deputy Governor K C Chakrabarty told reporters here on the sidelines of the inauguration of Bank of India’s mobile-based remittance facility for urban financial inclusion.

“The definition of financial inclusion is providing access to appropriate financial products and services to the most vulnerable group of the society in a fair, transparent and cost-effective manner by the mainstream financial institutions,” he said.

“When financial inclusion happens, banks will replace microfinance institutions. Then microfinance institutions will take the role of money lenders,” he said. Economic Times

Reserve Bank of India proposes tighter securitisation norms for NBFCs

The Reserve Bank of India (RBI) has proposed to tighten securitisation norms for non-bank financial companies (NBFCs), which will bring these on a par with those for banks.

Under the draft norms, released on Thursday, for loans up to 24 months maturity with a periodic repayment schedule, NBFCs will have to hold these on their books for a minimum of nine months. For bullet repayments (lump sum payment of the principal at maturity only), the minimum holding period is 12 months. RBI has invited comments on these proposals.

For loans above 24 months maturity with a periodic repayment schedule, NBFCs will have to hold these loans on their books for a minimum of 12 months. No securitisation of loans with maturity exceeding 24 months and bullet repayment is envisaged.Business Standard

RBI considering whether to allow MFIs to become ‘business correspondents’ for Banks
The Reserve Bank of India is considering a proposal put forward by profit-oriented microfinance institutions (MFIs) to allow them to be business correspondents of banks for financial inclusion.

Reserve Bank of India

Speaking at an international forum in Washington on Friday, Reserve Bank of India deputy governor Usha Thorat said the RBI is examining a proposal that large ‘for profit’ companies, having a wide network of outlets — especially in rural areas, could be allowed to act as business correspondents of banks (for financial inclusion). Economic Times

Interview with Deepak Parekh,Chairman of HDFC Bank on Indian Real Estate Market.

Did you know the average home loan size in India is only Rs 17 lakhs ? Read the Interview below to know more..

What is the trend in real estate development across cities ?

Growth is all from the outskirts of big cities. But in the smaller cities we are very active and here prices haven’t gone up that much. For example, prices in Kolkata, Lucknow and Jalandhar have not gone up that much. Our average loan size all-India this year is Rs 17 lakhs, which includes Mumbai and Delhi. If you take them out, the average is down to Rs 12 lakhs. In Mumbai, the average loan would be around Rs 25-30 lakhs. DNA India

‘Competition is squeezing our margins’ – Interview with Naresh Takkar, Managing director, Icra

Ratings agencies have seen huge growth in business due to the Reserve Bank of India’s (RBI’s) order for rating of corporate clients under Basel-II norms. While thus has meant growth in volumes, margins have dropped substantially. Naresh Takkar, managing director of Icra, talks to Abhijit Lele on business environment and challenges ahead.

Excerpts:Ratings agencies have got a lot of business in the last two years after RBI made rating of corporate borrowers mandatory under Basel-II norms. How did the market benefit from it?

The expansion in the universe of rated entities is good for the growth of the debt market in India. Earlier, only about 600-700 entities were rated. Now, the number has grown to about 5,000. Business Standard

Creating capital at bottom of pyramid

The MFI network and its code of conduct are aimed at taking microfinance to 100mn households by 2050
The ‘not-for-profit’ concept is not such a good thing if it means that an enterprise does not intend to improve itself financially. Profits attract more investments and, thus, its utility to its users grows. That is the lesson from the gurus of microfinance in India.

Microfinance is undernourished today. The task before the sector is almost limitless – financial inclusion of 60 per cent of the country’s population and creation a working capital at the bottom of the pyramid. The beneficiaries would be about 120 million households that are financially excluded. Business Standard

Home loan rates to increase soon.

Teaser home loan rates of some banks, including State Bank of India (SBI), which charges only 8 per cent for the first year may rise, as Reserve Bank of India (RBI) has not allowed banks to lend below the base rate. While SBI indicated that its base rate is likely to be around 8 per cent, for others banks the rate will be 8.25-8.5 per cent.Business Standard

Indian Rural bank introduces online banking and biometric ATM Cards

The Rushikulya Gramya Bank (RGB), one of the regional rural banks in Orissa, will soon introduce on-line transaction facilities and issue biometric ATM cards to its customers.

The bank will go for the requisite technology development with support from the sponsored bank, Andhra Bank after implementation of the Core Banking Solution (CBS) in all of its 81 branches located in south Orissa’s Ganjam and Gajapati districts.Business Standard

Tripura’s rural bank posts record Rs. 35.35 crore profit

The Tripura Gramin Bank (TGB), one of India’s 84 Regional Rural Banks (RRBs), posted a net profit of Rs.35.35 crore in 2009-2010, the highest among RRBs in Tripura.

The bank has 111 branches across the state, which gives flexibility to its customer to open account in any branch.

“We are satisfied. So many people cannot come to Agartala to open an account, so they open an account in Jotanbari, so it is very helpful, we can come any time and open an account,” said Edison Uchoi an account holder.

The bank’s credit-deposit ratio is now 39 per cent. Economic Times

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