Page 9 - Banking Finance December 2021

RBI CORNER

RBI: All micro loans must the collateral-free nature of tion Act, 1949, states that no banking
microfinance loans, as applicable to company can hold shares in any com-
be collateral-free
NBFC-MFIs, to all lenders in pany, as pledgee, mortgagee or abso-
The RBI has said it proposes to make microfinance space." lute owner, of an amount exceeding 30
micro-lending collateral-free, not just per cent of the paid-up share capital of
for microfinance institutions (MFIs) PM launches RBI's cus- that company or thirty per cent of its
but for all lenders. This follows non- own paid-up share capital and reserves.
MFIs adopting harsh collection mea- tomer-centric schemes
RBI carried out an inspection of the
sures, arbitraging the different regula- Prime Minister Narendra Modi on Fri-
tions for MFIs and other lenders. day launched two customer-centric state-run lender's 'financial positions'
as on March 31, 2018 and March 31,
Delivering the inaugural address at the schemes with a view to strengthen fi- 2019, and also examined the risk as-
Sa-Dhan National Conference on nancial inclusion as well as to improve sessment reports, inspection report.
'Revitalising financial inclusion', RBI grievance redressal mechanism. The
deputy governor Rajeshwar Rao said launch the 2 schemes -- Reserve Bank's "....the examination of the risk assess-
that current regulations have created Retail Direct Scheme and Integrated ment reports, inspection report and all
a non-level playing field. "The current Ombudsman Scheme -- will expand in- related correspondence pertaining to
regulatory framework, which was put vestment opportunities in the country the same, revealed, inter-alia, contra-
in place with the objective of making and ensure easier access to capital vention of sub-section (2) of section 19
credit available to low-income house- markets with simple and secure of the Act to the extent the bank held
holds and to protect borrowers from mechanism, he said while launching shares in borrower companies, as
harsh recovery practices of the lenders, schemes through video conferencing. pledgee, of an amount exceeding
is applicable only to NBFC-MFIs. At the same time, he said, Retail Di- thirty per cent of paid-up share capi-
Whereas other lenders, who now have rect Scheme will also help in garnering tal of those companies,'' said RBI in its
a share of around 70% in the funds for development works. Simi- statement.
microfinance portfolio, are not sub- larly, One Nation, One Ombudsman Subsequently, RBI issued a notice to
jected to similar regulatory condi- System has taken shape in the banking State Bank of India, asking why the
tions," he said. sector with the Integrated Ombuds- penalty should not be imposed on it for
man Scheme today, he said.
Rao asked lenders to be cautious and the contravention of the directions.
not to copy the large ones as After examining the bank's response to
microlending has a social objective. RBI Imposes Rs. 1 Crore the notice, the RBI said it "came to the
"Prioritisation of profitability at the Penalty on State Bank Of conclusion that the charge of contra-
expense of social and welfare goals of vention of the aforesaid provisions of
microfinance may not be an optimal India for Violating Norms the Act was substantiated'', and then
outcome. Lenders need to remain cog- The Reserve Bank of India (RBI) im- imposed the monetary penalty.
nizant of the fact that the balance posed a monetary penalty of Rs. 1
sheet growth should not be built by crore on the country's largest lender RBI in silence over corpo-
compromising on prudent conduct," State Bank of India (SBI) For holding
he said. shares in the borrower companies of rate entry in banks
Rao pointed out that borrowers who an amount exceeding 30 per cent of The Reserve Bank of India has kept in
the paid-up share capital of those com-
take microloans lack the type of collat- abeyance the entry of industrial houses
panies. The RBI imposed the penalty into full fledged commercial banking
eral preferred by lenders. However, he
for the contravention of sub-section (2) even as it accepted 21 of the 33 rec-
noted, lenders still repossess whatever
of section 19 of the Banking Regulation
little collateral they have for pledging. ommendations of an internal working
Act, 1949, according to its statement group, dashing hopes of the Tatas and
"It is more for inducing repayments
said, November 26.
rather than to recover losses. There- Birlas to add banking to their sprawl-
fore, it has been proposed to extend Sub-section (2) of the Banking Regula- ing business empires.
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