MFIs not under threat: Gokarn

MFIs not under threat: Gokarn

Dhapdhapi: Reserve Bank of India (RBI) deputy governor Subir Gokarn on Tuesday said though Micro Finance Institutions (MFIs) could be under stress, there is no threat to their survival.

“This is a fact that the MFIs were facing funds shortage as banks are shying away. The MFIs might be under temporary stress, but not under threat," Gokarn told reporters at a financial inclusion programme here in South 24 Parganas district.

Keeping this situation in mind, RBI has restricted the timeframe for submission of the Y H Malegam Committee’s report on MFIs to two months.

“It is true that a longer timeframe is needed to make the findings of the committee more comprehensive, but a balance has to be struck between timeframe and comprehensiveness," he said.

The committee was expected to submit its report by the middle of January.

Asked whether NBFCs would be allowed to act as business correspondents (BC) on behalf of commercial banks, he said there was a conflict of interest inherent in this.

Since banks were engaging BCs for last mile connectivity, the NBFCs were also reaching out to the unbanked areas. “There is a question in allowing NBFCs for the time-being", he said.

According to broad principles, the MFIs were important for establishing the last-mile connectivity required for financial inclusion.

But there should not be any deviation from this, which would undermine the purpose, he said.

To a query, Gokarn said the fact can’t be ignored that banks would have to make money out of the financial inclusion initiative. “Banks must see it as a business opportunity."

In the early stages, it might not be easy to find the activity commercially viable.

RBI was looking at possible ways to facilitate the banks in this regard, he said.

Gokarn today inaugurated a customer service point of United Bank of India for villagers of the region.