MFIs demand bank funding resumption

Microfinance institutions, or MFIs, plan to approach banking regulator, Reserve Bank of India (RBI) and banking lobby Indian Banks’ Association (IBA) to demand the resumption of bank finance to the industry.  Commercial banks have been slow in releasing loans and considering new loan requests from microlenders since October, when Andhra Pradesh, the hub of the Indian microlending industry, imposed curbs on how MFIs recover money from borrowers—putting their ability to repay bank loans in question. “At an industry level, we are going to take up the issue with the Reserve Bank and IBA as survival of MFIs without adequate bank finance is difficult,” said Alok Prasad, chief executive of Microfinance Institutions Network (MFIN), an industry lobby.  MFIN is likely to approach RBI by next week, Prasad said. Microlenders said banks were unwilling to comply despite an RBI notice last month asking them to recycle loans to the sector—or channel money received as payment of earlier loans back to MFIs. “Banks are advised that they should endeavour to recycle the collections to MFIs,” RBI had said.