RBI Grade BNABARD ESISEBI
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Context:
“RBI MPC Unpacked: Key Theory Meets Today’s Macro Trends”Tap to play · from the C4S channel
The Reserve Bank of India (RBI) has called on microfinance institutions (MFIs) to expand their lending beyond the traditional joint liability group (JLG) model, in order to strengthen financial stability and enhance contribution to the economy.
This was highlighted at a seminar in Kolkata organized by the Association of Microfinance Institutions (AMFI)-West Bengal, where senior RBI officials and industry experts discussed the future of MFI lending.
Key Recommendations
- Diversify Lending Products:
- Move from mono-product lending (entrepreneurial loans) to micro-enterprise finance.
- Explore new asset classes such as:
- Inventory financing – short-term loans to manage cash flows between purchase and sale of goods.
- Capital asset financing – long-term loans for acquiring machinery and productive assets.
- Basic payments support – financial products that support operational liquidity.
- Progressive Lending Approach:
- Design products to match small business growth, starting with working-capital loans and gradually moving to larger financing solutions.
- Leverage Regulatory Relaxation:
- RBI reduced the qualifying microfinance asset ratio from 75% to 60%, allowing NBFC-MFIs to diversify into MSME loans, gold loans, and loans against property.
