The need of a legislative regulation to supervise the microfinance sector has been felt in the wake of the repayment concerns faced by microlenders in Assam.
Around 7 per cent of the borrowers in the segment in the northeastern state have more than Rs 1 lakh in outstanding loans as of March, breaching the RBI limit, compared with the national average of 3 per cent.
While the RBI has revised the limit to Rs 1.25 lakh in November this year, over-leverage is still a concern.
Assam is among the top 10 states of the country in terms of the gross loan portfolio.
At present, the NBFC MFIs operate under the regulations of the RBI, but there are other not-for-profit organisations and financial institutions in the business of microlending.
According to industry associations such as MFIN and Sa-Dhan, there is a lack of awareness about the operations of MFIs. Moreover, there are organisations that are engaged in microlending but are still unregulated.
According to P. Satish, executive director, Sa-Dhan, there is a need to revisit the need for legislation.
“The RBI can continue as an umbrella regulator but under that there can be a supervisor to cover all the MFIs operating in the country along with NBFC-MFIs,” he said while speaking at a microfinance summit organised by AMFI-WB.