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Business Recorder
6 hours ago
- Business
- Business Recorder
India central bank deputy flags concerns in microfinance sector, urges reforms
MUMBAI: India's microfinance sector continues to grapple with high interest rates, rising borrower over-indebtedness, and coercive recovery practices, highlighting the need for urgent lender reforms, a deputy governor of the central bank said. 'The (microfinance) sector continues to suffer from vicious cycle of over-indebtedness, high interest rates and harsh recovery practices,' M. Rajeshwar Rao said at an event in Mumbai on June 5. The speech was uploaded on the central bank's website on Monday. Indian banks have reported stress in the microfinance segment since the beginning of the current financial year, largely due to high borrower indebtedness, declining rural incomes, and election-related disruptions Indian central bank's FX forward book shrinks to $52.48 billion Even lenders with access to low-cost funds have been found to be charging significantly higher margins than the industry norm, which in several instances appear excessive, Rao said. While some moderation in interest rates on microfinance loans has been observed in recent quarters, pockets of high interest rates and elevated margins continue to persist, Rao said in the speech. Rao urged lenders to look beyond the conventional 'high-yielding business' tag for the microfinance sector, adding that there is a need to strengthen credit assessments to prevent borrower over-leverage and strictly avoid coercive recovery practices. Despite sound business models, he pointed out that organizational structures and incentive schemes might be flawed, resulting in 'perverse' outcomes for customers. 'This calls for an introspection around the models,' he added.
Time of India
10 hours ago
- Business
- Time of India
RBI deputy flags concerns in microfinance sector, urges reforms
India's microfinance sector continues to grapple with high interest rates, rising borrower over-indebtedness, and coercive recovery practices, highlighting the need for urgent lender reforms , a deputy governor of the central bank said. "The (microfinance) sector continues to suffer from vicious cycle of over-indebtedness, high interest rates and harsh recovery practices," M. Rajeshwar Rao said at an event in Mumbai on June 5. The speech was uploaded on the central bank's website on Monday. Indian banks have reported stress in the microfinance segment since the beginning of the current financial year, largely due to high borrower indebtedness, declining rural incomes, and election-related disruptions Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Moose Approaches Girl At Bus Stop In Haryana - Watch What Happens Happy in Shape Undo Even lenders with access to low-cost funds have been found to be charging significantly higher margins than the industry norm, which in several instances appear excessive, Rao said. While some moderation in interest rates on microfinance loans has been observed in recent quarters, pockets of high interest rates and elevated margins continue to persist, Rao said in the speech. Live Events Rao urged lenders to look beyond the conventional "high-yielding business" tag for the microfinance sector, adding that there is a need to strengthen credit assessments to prevent borrower over-leverage and strictly avoid coercive recovery practices. Despite sound business models, he pointed out that organizational structures and incentive schemes might be flawed, resulting in "perverse" outcomes for customers. "This calls for an introspection around the models," he added.
Yahoo
10 hours ago
- Business
- Yahoo
India cenbank deputy flags concerns in microfinance sector, urges reforms
MUMBAI (Reuters) -India's microfinance sector continues to grapple with high interest rates, rising borrower over-indebtedness, and coercive recovery practices, highlighting the need for urgent lender reforms, a deputy governor of the central bank said. "The (microfinance) sector continues to suffer from vicious cycle of over-indebtedness, high interest rates and harsh recovery practices," M. Rajeshwar Rao said at an event in Mumbai on June 5. The speech was uploaded on the central bank's website on Monday. Indian banks have reported stress in the microfinance segment since the beginning of the current financial year, largely due to high borrower indebtedness, declining rural incomes, and election-related disruptions Even lenders with access to low-cost funds have been found to be charging significantly higher margins than the industry norm, which in several instances appear excessive, Rao said. While some moderation in interest rates on microfinance loans has been observed in recent quarters, pockets of high interest rates and elevated margins continue to persist, Rao said in the speech. Rao urged lenders to look beyond the conventional "high-yielding business" tag for the microfinance sector, adding that there is a need to strengthen credit assessments to prevent borrower over-leverage and strictly avoid coercive recovery practices. Despite sound business models, he pointed out that organizational structures and incentive schemes might be flawed, resulting in "perverse" outcomes for customers. "This calls for an introspection around the models," he added. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
The Hindu
23-05-2025
- Business
- The Hindu
RBI gives ₹2.69 lakh crore dividend to Central govt for FY25
The Reserve Bank of India (RBI) on Friday (May 23, 2025) approved the transfer of ₹2,68,590.07-crore as surplus to the Central Government for the accounting year 2024-25. Under the the Chairmanship of RBI Governor Sanjay Malhotra, the decision was made in the 616th meeting of the Central Board of Directors of the Reserve Bank of India. RBI in a statement said, 'During accounting years 2018-19 to 2021-22, owing to the prevailing macroeconomic conditions and the onslaught of the Covid-19 pandemic, the Board had decided to maintain the CRB at 5.50% of the Reserve Bank's Balance Sheet size to support growth and overall economic activity.' 'The CRB was increased to 6.00% for FY 2022-23 and to 6.50% for FY 2023-24. Based on the revised ECF, and taking into consideration the macroeconomic assessment, the Central Board decided to further increase the CRB to 7.50%. The Board thereafter approved the transfer of ₹2,68,590.07 crore as surplus to the Central Government for the accounting year 2024-25,' the RBI said in a statement. 'The Board reviewed the global and domestic economic scenario, including risks to the outlook. The Board also discussed the working of the Reserve Bank during the year April 2024 – March 2025 and approved the Reserve Bank's Annual Report and Financial Statements for the year 2024-25,' the RBI said. 'The transferable surplus for the year (2024-25) has been arrived at on the basis of the revised Economic Capital Framework (ECF) as approved by the Central Board in its meeting held on May 15, 2025. The revised framework stipulates that the risk provisioning under the Contingent Risk Buffer (CRB) be maintained within a range of 7.50 to 4.50% of the RBI's balance sheet,' it added. The meeting was attended by Deputy Governors M. Rajeshwar Rao, T. Rabi Sankar, Swaminathan J., Dr. Poonam Gupta and other Directors of the Central Board – Ajay Seth, Secretary, Department of Economic Affairs, Nagaraju Maddirala, Secretary, Department of Financial Services, Satish K. Marathe, Revathy Iyer, Prof. Sachin Chaturvedi, Pankaj Ramanbhai Patel and Dr. Ravindra H. Dholakia.
