Banks for maintaining priority sector status for MFIs

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Banks for maintaining priority sector status for MFIs

Banks have asked the Reserve Bank for preservation of priority sector status for the microlending sector, irrespective of the individual conduct of borrowing microfinance institutions (MFIs).

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Banks have asked the Reserve Bank for preservation of priority sector status for the microlending sector, irrespective of the individual conduct of borrowing microfinance institutions (MFIs).

Bankersmain reservation is nothing should happen by which some act or conduct or misconduct of MFIs should result in the priority sector status being withdrawn," Indian Banks Association''s Chief Executive, K Ramakrishnan, told PTI here.

Top bankers, including Corporation Bank's Chairman and Managing Director Ramnath Pradeep, HDFC Bank's Managing Director Aditya Puri, Axis Bank CEO Shikha Sharma and Dhanlaxmi Bank's Chief Amitabh Chaturvedi, met RBI Deputy Governor KC Chakrabarty to voice their concerns regarding the recommendations of the Malegam Committee on MFIs, before they are ratified into guidelines on April 1.

Ramakrishnan said even though the Malegam committee has suggested the continuance of priority sector status for loans to the MFI sector, there are some conditions wherein the status can be cancelled due to the misconduct of borrowing MFI like using coercion, charging higher interest rate, etc.

"If the MFIs don''t do certain things vis-a-vis borrowers, don''t penalise me in terms of regulation by taking out sector (from priority sector)," he said.
He added that the RBI was appreciative of the reservations expressed by the bankers. .