tailieunhanh - Report of the Sub-Committee of the Central Board of Directors of Reserve Bank of India to Study Issues and Concerns in the MFI Sector

The Joint Forum supports continued efforts by firms to further develop such methodologies in spite of the difficulties associated with both the need to reconcile differing time horizons for risk assessment and the measurement of diversification benefits. However, it should be noted the potential for excessive optimism when making simplifying assumptions in the calculation of risk measures that span multiple categories of risk. In the absence of precise data, it may be tempting for firms to assume significant amounts of diversification benefits, rather than take a conservative approach. Firms should therefore evaluate such simplifying assumptions carefully, particularly their potential validity. | Report of the Sub-Committee of the Central Board of Directors of Reserve Bank of India to Study Issues and Concerns in the MFI Sector RESERVE BANK OF INDIA January 2011 1 Introduction The Board of Directors of the Reserve Bank of India at its meeting held on October 15 2010 formed a Sub-Committee of the Board to study issues and concerns in the microfinance sector in so far as they related to the entities regulated by the Bank. The composition of the Sub-Committee was as under - Shri . Malegam - Chairman Shri Kumar Mangalam Birla Dr. K. C. Chakrabarty Smt. Shashi Rajagopalan Prof. . Rao Shri V. K. Sharma Executive Director - Member Secretary The terms of reference of the Sub-Committee were as under - 1. To review the definition of microfinance and Micro Finance Institutions MFIs for the purpose of regulation of non-banking finance companies NBFCs undertaking microfinance by the Reserve Bank of India and make appropriate recommendations. 2. To examine the prevalent practices of MFIs in regard to interest rates lending and recovery practices to identify trends that impinge on borrowers interests. 3. To delineate the objectives and scope of regulation of NBFCs undertaking microfinance by the Reserve Bank and the regulatory framework needed to achieve those objectives. 4. To examine and make appropriate recommendations in regard to applicability of money lending legislation of the States and other relevant laws to NBFCs MFIs. 5. To examine the role that associations and bodies of MFIs could play in enhancing transparency disclosure and best practices 6. To recommend a grievance redressal machinery that could be put in place for ensuring adherence to the regulations recommended at 3 above. 7. To examine the conditions under which loans to MFIs can be classified as priority sector lending and make appropriate recommendations. 1 8. To consider any other item that is relevant to the terms of reference. 2 The Microfinance sector Microfinance is an .