Micro Finance Institutions

In News 

• Microfinance companies are expecting greater growth in rural markets than urban, following new guidelines issued by the Reserve Bank of India .

More In News 

• The central bank has allowed households earning up to ?3 lakh annually to be classified as eligible for microloans, expanding the market for microfinance institutions (MFIs). 
• The cap earlier was ?1.25 lakh in rural areas and ?2 lakh in other areas. 
• It also removed the cap on pricing loans, aiding deeper penetration into existing markets and entry into new ones.

About Micro Finance Institutions

• It offers a form of financial service which provides small loans and other financial services to poor and low-income households.
•  It promotes financial inclusion which enables the poor and low-income households to come out of poverty, increase their income levels and improve overall living standards. 
• It can facilitate achievement of national policies that target poverty reduction, women empowerment, assistance to vulnerable groups, and improvement in the standards of living. 
• Growth 
  • The Indian microfinance sector has witnessed phenomenal growth over the past two decades in terms of increase in both the number of institutions providing microfinance as also the quantum of credit made available to the microfinance customers. 
• Microcredit Delivery Channels
  • Microcredit is delivered through a variety of institutional channels viz.
    • Scheduled commercial banks (SCBs) (including small finance banks (SFBs) and regional rural banks (RRBs)) lending both directly as well as through business correspondents (BCs) and self-help groups (SHGs)
    • Cooperative banks
    • Non-banking financial companies (NBFCs), and 
    • Microfinance institutions (MFIs) registered as NBFCs as well as in other forms

Source:LM