Microfinance institutions (MFIs) may finally have something to cheer about. The Reserve Bank of India (RBI) on Wednesday said it is considering a proposal from banks to allow them to restructure loans to the sector, without classifying the assets as non-performing. According to RBI norms, banks can restructure standard assets, but they have to be treated as sub-standard and require provisioning.
A decision will be taken as soon as the Indian Banks’ Association comes up with a detailed proposal. Restructuring the loans is expected to help avert defaults, which could turn loans into non-performing assets. At a meeting here on Wednesday with top banks, RBI also advised them not to choke funds to MFIs.
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