RBI extends deadline for MFI provisioning norms

The Reserve Bank has deferred the deadline on implementation of asset classification and provisioning norms for non-banking financial company-micro finance institutions (NBFC-MFIs) to April 1, 2013 from April this year. "Taking into account the difficulties faced by MFI sector and the representation received by the bank from them, it has been decided to defer the implementation of asset classification and provisioning norms for NBFC-MFIs to April 1, 2013," RBI said in a notification. Click here for Cloud Computing Also Read Related Stories News Now - 'No immediate steps for rupee convertibility on capital account' - 'RBI may respond to market demand' - Higher service tax rate to add to burden on small borrowers - RBI offers breather to MFIs - 3 arrested in Adarsh housing scam - When taxpayers are above the taxman NBFC-MFIs was introduced as a new category on December 2, 2011, which also contained guidelines on asset classification and provisioning norms to be adhered to by the MFIs with effect from April 01, 2012. "The NBFC-MFIs are, however, required to comply with the other regulations laid down in December, 2011," it said. In the second quarter review of monetary policy in November, 2010, a sub-committee of the Central Board of the Reserve Bank, chaired by YH Malegam, was constituted to study issues and concerns in the MFI sector. "However, the committee submitted its report in January 2011. Thereafter, the broad framework of regulations recommended by Malegam has been accepted by the bank," RBI had said earlier. In October 2010, the MFI sector faced problems in which a spate of suicides by borrowers in Andhra Pradesh due to alleged pressure from recovery agents appointed by the MFIs. Andhra government then passed a law which gave overarching powers to the state and imposed a slew of measures to control MFIs' activities, including capping their lending rates.