A Joint Liability Group (JLG) is usually an informal group of 4-10 people who seek loans based on a mutual guarantee. The loans are typically used for agriculture or related operations. This group of borrowers includes farmers, rural workers, and tenants. Each member of a JLG is equally liable for the timely repayment of the…
The Reserve Bank of India is the regulator of microfinance institutions in India. The RBI regulations are uniformly applicable to all microfinance lenders including banks, small finance banks, NBFC, and not-for-profit companies (regulated entities –RE). The provisions of Reserve Bank of India (Regulatory Framework for Microfinance Loans) Directions, 2022 The annual household income level…
The delivery of microfinance institutions (MFIs) around the world follows a variety of different methodologies for the provision of financial services to low–income families. The Task Force constituted by NABARD in 1998 to arrive at a conceptual policy framework encompassing issues in policy, regulation, financing, and capacity building, for sustainable growth of Micro Finance in…
The concept of Grameen Bank has its roots in Grameen Bank of Bangladesh which was developed by the Nobel Laureate Prof. Muhammad Yunus. By establishing Grameen Bank in 1983, Muhammad Yunus sought to realise his vision of self-support for the very poorest people using loans on easy terms. The bank has since been a source…
The expression microfinancing has its roots in the 1970s when organizations, such as Grameen Bank of Bangladesh with the microfinance pioneer Mohammad Yunus, were starting and shaping the modern industry of microfinancing. In India, the concept of microfinance first came into existence in 1974 when Mrs. Ela Bhatt started the Self-Employed Women’s Association (‘SEWA’) of…
The Reserve Bank vide its circular dated September 28, 2006, issued guidelines on the Fair Practices Code (FPC) for all NBFCs to be adopted by them while doing lending business. The same was revised with the sector including the creation of a New Category of NBFCs viz; NBFC-MFI and the rapid growth in NBFCs lending…
The National Bank for Financing Infrastructure and Development (NaBFID/NBFID) was established as an infrastructure-focused development financial institution (DFI) under the National Bank for Financing Infrastructure and Development Act, 2021 to support the development of long-term non-recourse infrastructure financing in India including the development of bonds and derivatives markets necessary for infrastructure financing and to carry…
A universal bank is a kind of bank that takes part in diverse kinds of banking activities related to activities of both a commercial bank and an investment bank as well as providing other financial services such as insurance. Universal Banks are also called full-service financial firms, as they offer traditional banking facilities extended by…
A Development Financial institution (DFI) may be defined as “a financial institution endorsed or supported by the Government of India primarily to provide development/Project finance to one or more sectors or sub-sectors of the economy. DFIs differentiate their role as providers of the long-term capital needs of the economy in a significant manner. They emphasize…
At the early stage of independence, there were no long-term financing institutions in India. The role of commercial banking at that time was limited to working capital financing on a short-term basis. Therefore, the role of DFIs was to recognize the gaps in institutions and markets in our financial sector and act as a gap-filler…