Financial Inclusion
Balance financial inclusion with due diligence, banking secy tells microfinance cos
This story was originally published at 15:30 IST on 23 October 2024
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NEW DELHI - While microfinance institutions have played a significant role in fostering financial inclusion, they should steer clear of reckless loan sanctioning, Department of Financial Services Secretary M. Nagaraju said Wednesday. "We should be careful on this. Any reckless or poor underwriting norms regarding self help groups or joint liability groups will only harm the sector," he said at an event organised by Sa-Dhan.
Nagaraju said that at the time of lending, microfinance companies should conduct thorough due diligence as lack of capacity among borrowers to repay would hurt the sector.
His comments on lending by microfinance companies follow the Reserve Bank of India taking action against four microfinance companies – Asirvad Micro Finance Ltd., Arohan Financial Services Ltd., DMI Finance Pvt. Ltd. and Navi Finserv Ltd – asking them to cease and desist from sanction and disbursal of loans.
"We should be very careful in what we lend, when we lend, and how we lend because their financial literacy is limited...exposure to the outside world is limited," he said, adding that microfinance institutions should not capitalise on that. "We should actually try to empower them, provide the needed finance and also ensure hand holding so that they flourish."
His comments on balancing risks with increased lending to lower-ticket borrowers also come at a time when the government has been pushing for financial inclusion. End
Reported by Priyasmita Dutta and Sagar Sen
Edited by Avishek Dutta
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