Important Provisions of new MFI bill


1)It  will override all other laws, including legislations passed by states like Andhra Pradesh, to protect consumers.

2) The proposed MFI Bill provides regulatory clarity by making the RBI the sole regulator for the MFI sector . The Bill has proposed the RBI can delegate some of its powers to National Bank for Agriculture & Rural Development.

3) Every MFI will have to register with the RBI within three months of the commencement of the 
Act.

4) The RBI will have sweeping powers to regulate lending rates and margins besides fixing prudential norms.

5) The draft Bill also recommends that all MFIs must create a reserve fund out of its net profit, and entrusts RBI to decide on the percentage that should be transferred to this fund every year

6) The Bill clarifies that services provided by MFIs will not be treated as money lending.

7) Another key point in the Bill is that interest rates will not be regulated but what the RBI will regulate are the margins which have been defined as the difference between the sum of interest rates plus other charges and the cost of funds.

8)  The minimum capital of Rs 5 lakh is for  the initial investment only. The proposed minimum level of capital is to ensure that no MFI should feel that it cannot stay in business because of lack of capital.


9) It proposes to create a Microfinance Development Fund would enhance funding opportunity and augment the flow of credit to the sector.

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