Non-review of MFI's programs by banks draw RBI's ire

The Reserve Bank of India is pulling up banks for not adhering to best practices and slacking on their role of reviewing microfinance institutions’ operations after extending credit support, reports The Hindu Business Line. The newspaper is quoted as saying that the apex bank sent a circular to the public sector lenders, mentioning that they were “not engaging themselves in capacity building and empowerment of the groups to the desired extent.''  At present, MFIs are disbursing loans within 10-15 days of the formation of new groups. However, the practice is to take six-seven months of group formation or nurturing/ hand-holding. “As a result, cohesiveness and a sense of purpose were not being built up in the groups formed by these MFIs,” the RBI is reported to have said in the paper.