Originally published: December 30, 2006
Source: The Economic Times, India
An increasing number of microfinance institutions (MFIs) are seeking non-banking finance company (NBFC) status from RBI to get wide access to funding, including bank finance. This is happening at a time when banks are looking to increase their exposure to microcredit. In addition, MFIs and NGOs are looking at broad-basing their sources of funds. These include raising funds through equity investments, debt funds, external commercial borrowings (ECBs), venture capital funds, grants and contributions.
In the last couple of months, the central bank has granted fresh licences to around 10 such organisations. MFIs such as Biswa in the East, Grameen Kuta in Bangalore, Bandhan in West Bengal have already received NBFC licences from RBI, while start-up institutions like Ujivan in Bangalore and Opportunity International in Chennai have also been granted approvals.
Following the crisis in Andhra Pradesh wherein the state government had asked local MFIs to close down operations as they competed with the state lending programme called Velagu, banks are becoming increasingly skeptical to lend to non-NBFC MFIs.
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