RBI urges MFIs to stay focused on lending to self-help groups and microenterprises
New Delhi, October 28 (KNN) The Deputy Governor of the Reserve Bank of India, Mr. Rajeshwar Rao has called on the microfinance sector (MFI) not to deviate from its main objective by following the functioning of traditional commercial banks.
The Central Bank said it would look after the growth of MFIs, therefore, they “should not lose sight of the prudence to achieve higher growth and returns on assets.”
Speaking at a conference hosted by Sa-Dhan, a self-regulatory organization in the MFI sector, Rao said, “MFIs should focus on understanding clients’ needs first and providing them with the necessary support. via financial products ”.
MFIs lend to microenterprises in underserved areas of India. It provides small loans and other financial services to poor and low-income households.
It is an economic tool designed to promote financial inclusion that enables poor and low-income households to lift themselves out of poverty, increase their income levels and improve their overall standard of living.
It can facilitate the implementation of national policies that target poverty reduction, the empowerment of women, assistance to vulnerable groups and improvement of living standards. India’s microfinance industry has grown tremendously over the past two decades in terms of increasing both the number of institutions providing microfinance as well as the amount of credit made available to microfinance clients, in accordance with to RBI guidelines.