Lok Sabha Question No. 977 (UNSTARRED), answered on 2016-07-22
Subject: Performance of MFIs
Ministry: FINANCE
Asked by: SHIVKUMAR CHANABASAPPA UDASI

## Draft Reply Govt. of India Ministry of Finance Department of Financial services

## LOK SABHA UNSTARRED QUESTION No. 977

TO BE ANSWERED ON THE 22 th  July, 2016 / Ashadha 31, 1938 (SAKA)

## Performance of MFIs

## QUESTION

977. SHRI SHIVKUMAR UDASI:

Will the Minister of FINANCE be pleased to state:

- (a) whether the Micro Finance Institutions (MFIs) including Local  Area  Banks  (LABs)  are functioning satisfactorily and have a significant positive effect on the economy of the country;
- (b)  if  so,  the  details  thereof  and  if not, the reasons for their failure; and
- (c) the steps taken by the Government to improve the condition of  these  MFIs  and Labs?

## ANSWER

## To be answered by ( MINISTER OF STATE IN THE MINISTRY OF FINANCE) (SHRI  SANTOSH KUMAR GANGWAR)

- (a) & (b): Non-Banking  Financial  Company  -  Micro  Finance Institutions (NBFC-MFIs) having legal company structure are regulated by Reserve Bank of India (RBI). As per RBI, these MFIs are functioning satisfactorily and have a positive impact on  the  economy  of  the  country.  Number  of  such  MFIs registered with RBI has increased from 46 in March, 2014 to 70 in March, 2016 and loans & advances of these MFIs has increased from Rs.20,969 crore to Rs.44,557 crore during the same period.

Presently  three  Local  Area  Bank  (LABs)  are  in existence  viz.  Coastal  LAB  Ltd.,  Krishna  Bhima  Samruddhi LAB  Ltd.  and  Subhadra  LAB  Ltd.  These  are  functioning reasonably  well  with  high  Capital  to  Risk  Weighted  Assets Ratio (CRAR), negligible NPAs and reasonable profits.

(c): The steps taken by RBI to improve the condition of MFIs and  LABs,  include  inter  alia  a  separate  category  of  NBFCMFIs, a Self-Regulatory Organisation (SRO) structure, guidelines on Fair Practice Code, interest rate caps to protect customers,  LABs  owned  and  controlled  by  residents  made eligible for conversion into Small Finance Bank etc.

## Govt. of India Ministry of Finance Department of Financial services

## LOK SABHA UNSTARRED QUESTION No. 977 TO BE ANSWERED ON THE 22 th  July, 2016 / Ashadha 31, 1938 (SAKA)

## Performance of MFIs

## QUESTION

## 977. SHRI SHIVKUMAR UDASI:

Will the Minister of FINANCE be pleased to state:

- (a) whether the Micro Finance Institutions (MFIs) including Local Area Banks (LABs) are functioning satisfactorily and have a significant positive effect on the economy of the country;
- (b) if so, the details thereof and if not, the reasons for their failure; and
- (c) the steps taken by the Government to improve the condition of these MFIs and Labs?

## ANSWER (MINISTER OF STATE IN THE MINISTRY OF FINANCE) (SHRI SANTOSH KUMAR GANGWAR)

(a) & (b): Non-Banking Financial Company - Micro Finance Institutions (NBFC-MFIs) having legal company structure are regulated by Reserve Bank of India (RBI). As per RBI,  these  MFIs  are  functioning  satisfactorily  and  have  a  positive  impact  on  the economy of the country. Number of such MFIs registered with RBI has increased from 46 in March, 2014 to 70 in March, 2016 and loans and advances of these MFIs has increased from Rs.20,969 crore to Rs.44,557 crore during the same period.

Presently  three  Local  Area  Bank  (LABs)  are  in  existence  viz.  Coastal  LAB Ltd., Krishna Bhima Samruddhi LAB Ltd. and Subhadra LAB Ltd. These are functioning reasonably  well  with  high  Capital  to  Risk  Weighted  Assets  Ratio  (CRAR),  negligible NPAs and reasonable profits.

(c): The steps taken by RBI to improve the condition of MFIs and LABs, include inter alia a separate category of NBFC-MFIs,  a  Self-Regulatory Organisation  (SRO) structure,  guidelines  on  Fair  Practice  Code,  interest  rate  caps  to  protect  customers, LABs  owned  and  controlled  by  residents  made  eligible  for  conversion  into  Small Finance Bank etc.

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