Riskpro Risk Alert: RBI regulates MFI
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1 RBI’s Guidelines for NBFC MFI December 2011 Riskpro, India
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PPT gives overview of MFI regulation as released by RBI on December 2011
Transcript of Riskpro Risk Alert: RBI regulates MFI
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RBI’s Guidelines for NBFC MFI
December 2011
Riskpro, India
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RBI now regulates MFI industry
A Sub-Committee of the Central Board of the Reserve Bank (Chairman: Shri Y. H.
Malegam) was constituted to study issues and concerns in the MFI sector
RBI has introduced Micro Finance Institutions(MFIs) as a new category of Non Banking
Financial Companies (NBFC).
The RBI said that NBFC-MFI will have the following features
Will be a non Deposit taking NBFC.
Have minimum net owned funds of Rs 5 crores
Not less than 85% of its net assets being under qualifying assets.
A major move to regulate a very sensitive financing sector
Aims at ensuring consumer protection
Definition of NBFC - MFI
An NBFC-MFI is defined as a non-deposit taking NBFC(other than a company licensed under Section
25 of the Indian Companies Act, 1956) that fulfils the following conditions:
i. Minimum Net Owned Funds of Rs.5 crore (Rs 2Cr for certain MFIs)
ii. Not less than 85% of its net assets are in the nature of “qualifying assets.”
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Regulatory Requirements for MFI
Comply with Corporate Governance regulation for NBFC
Investments in Information Technology for better control, procedures and reduced costs
All NBFC MFI need to comply with following Regulatory Requirements.
Maintain net owned funds of Rs 5crores.
Capital adequacy of 15% of aggregated risk weighted assets
Asset Classification
Standard asset - No default
Nonperforming – Interest/principal payment has remained overdue for over 90 days
1. Borrower’s annual income : Rural area - Less than Rs 60,000 /Urban less than Rs 1,20,000
2. Total Loan : Max Rs. 50,000
3. Tenure : Minimum 2 years for loans over Rs 15,000
4. No prepayment penalty
5. Lending without collateral;
6. Repayment of instalments (weekly, fortnightly or monthly instalments) at the choice of the borrower
85% of lending activity to be of High Quality for investor protection.
Such “Good loans” comply with following.85%
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Consumer protection under MFI Regulations
All NBFC-MFIs shall maintain an aggregate margin cap of not more than 12%.
NBFC-MFIs shall not collect any Security Deposit/ Margin
Standard form of loan agreement
Not more than two NBFC-MFIs should lend to the same borrower
All sanctioning and disbursement of loans should be done only at a central location and more than
one individual should be involved in this function
Transparency of Interest Rates
Interest on individual loans will not exceed 26% per annum
Processing charges shall not be more than 1 % of gross loan amount
Effective rate of interest charged by the NBFC-MFI should be prominently displayed in all its offices
No penalty charged on delayed payment
Loan card (similar to a Bank pass book) with details provided to each Borrower
Recovery
Ensure Code of Conduct and systems are in place for recruitment, training and supervision of
recovery staff
Recovery only at Central office. If Borrower fails to appear there, then recovery at office/residence
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Who is Riskpro… Why us?
ABOUT US Riskpro is an organisation of member firms
around India devoted to client service excellence. Member firms offer wide range of services in the field of risk management.
Currently it has offices in three major cities Mumbai, Delhi and Bangalore and alliances in other cities.
Managed by experienced professionals with experiences spanning various industries.
MISSION
Provide integrated risk management consulting services to mid-large sized corporate /financial institutions in India
Be the preferred service provider for complete Governance, Risk and Compliance (GRC) solutions.
VALUE PROPOSITION You get quality advisory, normally delivered
by large consulting firms, at fee levels charged by independent & small firms
High quality deliverables
Multi-skilled & multi-disciplined organisation.
Timely completion of any task
Affordable alternative to large firms
DIFFERENTIATORS
Risk Management is our main focus
Over 200 years of cumulative experience
Hybrid Delivery model
Ability to take on large and complex projects due to delivery capabilities
We Hold hands, not shake hands.
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Risk Management Advisory Services
Training Recruitment
Basel II/III Advisory Market Risk
Credit Risk
Operational Risk
ICAAP
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Fraud Risk
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Forensic services
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Information Security
IT Assurance
IT Governance
Operational Risk Process reviews
Policy/ Process Review
Process Improvement
Compliance Risk
Governance Corporate Governance
Business Strategic risk
Fraud Risk
Forensic Accounting
Other Risks Business/Strategic Risk
Reputation Risk
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Banking – E Learning
Corporate Training
Regular Risk Management Training
Online Training material
Workshops / Events
Virtual Risk Managers
Full Time Risk Professionals
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Risk Managers on call – free
S E
R V
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Contacts and Office Locations
THANKS
Corporate Mumbai Delhi Bangalore
www.riskpro.in
Manoj Jain
Director
M- 98337 67114
Shriram Gokte
Principal - Information Risk
M- 98209 94063
Rahul Bhan
Director
M- 99680 05042
Raj Sawhney
Principal – Business Risk
M- 99711 03510
Casper Abraham
Director
M- 98450 61870
Ahmedabad Pune Agra
Maulik Manakiwala
Associate Firm
M - 91 9825640046
Gourav Ladha
Sap Risk Advisory
M- 97129 52955
M.L. Jain
Principal – Strategy Risk
M- 9822011987
Alok Kumar Agarwal
Associate Firm
M- 99971 65253
