Monday, October 26, 2020
Home Banking Finance RBI tips creating difficulties for MFIs: Sa-Dhan

RBI tips creating difficulties for MFIs: Sa-Dhan

Kolkata: Reserve Bank of India’s newest tips placing restrictions on present accounts is creating difficulties for microfinance corporations, their organisation Sa-Dhan mentioned, urging the banking regulator to exempt MFIs from the purview of the rule.

Last month, RBI had barred banks from opening present accounts for purchasers who’ve availed credit score amenities within the type of money credit score (CC)/ overdraft (OD) from the banking system and all transactions shall be routed by the CC/OD account.

Sa-Dhan government director P Satish mentioned the rule will not be sensible for the MFIs, which keep varied present accounts with banks primarily based on the placement of their branches.

“These current accounts will need to be closed. This is not practical,” he mentioned in a letter to Governor Shaktikanta Das.

“Since demonetization all loan disbursements of MFIs are being credited to the bank accounts of their borrowers. Many MFIs also have ECS mandates for loan collections. Such banks may or may not have CC/OD facility extended to such MFIs,” Satish defined in his letter.

“The requirement to route all transactions through CC/OD Account, would mean that all amounts collected from the borrowers and all loan amounts disbursed have to be routed through the CC/OD account,” he added.

Satish additionally mentioned that though mortgage disbursements of MFIs are by financial institution accounts of debtors, a big a part of collections are nonetheless in money. MFIs require a number of present accounts in a number of banks for his or her money administration necessities.

“This circular would result in making the cash management systems of MFIs cumbersome and costly,” the letter mentioned.

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