Authors: Misha SharmaPriyadarshini Ganesan The Microfinance sector is gearing up for change as the recent RBI (Regulatory Framework for Microfinance Loans) Directions, 2022 has put in place comprehensive regulations to ensure customer protection. A cornerstone of this regulation is household income assessment of microfinance clients which is often as difficult as it is crucial. Formal income assessment for those earning such income largely in an informal economy poses some specific challenges. This case study documents some of the suggested approaches to household income assessment and present ..read more

Algeria to host inclusive meeting for Palestinian factions: Algiers, Dec 7 Algerian President Abdelmadjid Tebboune announced that his country will  ..read more

Author: Dvara Research Dwijaraj Bhattacharya In our previous post, we discussed how the RBI’s Resolution Framework 2.0[1], which is one of the key policy interventions to combat debt distress induced by COVID-19, needs to be amended and extended beyond its current termination date of 30th September 2021. In this post, to help enhance the efficacy of such frameworks, we lay out the key principles that the two primary actors, the banking sector regulator and the regulated lenders, must be guided by while designing policies to tackle debt distress caused by severe economic shocks. In Part 1 of th ..read more

By Dwijaraj Bhattacharya, Dvara Research On May 5th, 2021, in response to the second wave of the pandemic, the Reserve Bank of India (RBI) re-introduced[1] a loan-restructuring window (Resolution Framework 2.0). Under the framework, lenders are currently allowed to restructure customers’ debts, subject to certain conditions. However, this window under the resolution framework is designated to end by 30th September 2021. Thus, to ensure that the debt distress faced by borrowers is alleviated, it is timely to consider three key questions. First, should the window under the resolution framework b ..read more

By Sowmini Prasad & Anukriti Tiwari, Dvara Research The Reserve Bank of India (RBI) released a Consultative Document on Regulation of Microfinance in June 2021 for public comments. It includes an overview of the microfinance sector in India and the developments it has witnessed over the past two decades. The consultative document notes that the regulatory framework for microfinance is currently applicable to only Non-banking Financial Companies – Microfinance Institutions (NBFC-MFIs) constituting only 30% of the microfinance portfolio, increasingly exposing microfinance borrowers to multip ..read more

By Sowmini Prasad, Dvara Research The Reserve Bank of India (RBI) proposed its intention to review the regulatory framework for Non-Banking Financial Company – Micro Finance Institutions (NBFC-MFIs) and harmonise the regulatory frameworks for various regulated lenders in the microfinance space. This was made as part of the Bi-monthly Monetary Policy Statement, 2020-21, announced on February 5, 2021. As acknowledged by the RBI in this statement, there is a case for having in place a framework that is uniformly applicable to all regulated lenders in the microfinance space, i.e., scheduled commer ..read more

By Amulya Neelam, Dvara Research Over the past several months, there have been reports of growing debt stress among microfinance borrowers in Assam[1]. Reports of collection agents harassing the borrowers, especially women, for the non-repayment of dues, have led to protests and general social unrest in the area. The state of Assam has already been the subject of several shocks such as political protests, a natural calamity in the form of a flood, and not to mention, the ongoing pandemic[2]. The cascading of these multiple shocks, in turn, has led to an increase in delinquencies for both banks ..read more

By Dwijaraj Bhattacharya, Monami Dasgupta, Misha Sharma, Dvara Research In the wake of COVID-19 related lockdown and the resultant impact on the financial lives of millions of households, the Reserve Bank of India (RBI) approved a series of regulatory measures, which among others, enabled lending institutions to provide their borrowers with a 6 month-repayment moratorium on term loans. A debt moratorium at this scale has had unique implications for lenders, borrowers and regulators that need careful consideration. Lenders care most about the impact of debt moratorium on credit risk, liquidity ..read more

By Nishanth K & Deepti George, Dvara Research During the recent 4thbi-monthly monetary policy statement on October 4th 2019,  the Governor of the Reserve Bank of India made an announcement to revise the indebtedness limits for borrowers of NBFC-MFIs. According to this revision, NBFC-MFIs would be able to lend to borrowers with a total NBFC-MFI debt of Rs. 1.25 lakh or less. Such assets originated by NBFC-MFIs could be classified as a “qualifying asset”[1] as long as other conditions such as limits on the annual income of the household, loan amount, loan tenure and repayment sched ..read more

By Deepti George, Dvara Research The objectives of sustainable businesses are well-aligned with ensuring the financial health of households, and this holds true for all types of lending businesses. In the specific context of microfinance businesses of NBFC-MFIs, this translates to the business objective of avoiding over-indebtedness of borrowers because of lending to them. Since the universe of borrowers can be characterised as belonging to low-income and vulnerable or potentially vulnerable backgrounds, lending institutions need to be particularly careful in ensuring this business objective i ..read more