Banks give RBI feedback on Malegam panel proposals: Sources

Banks have given the RBI feedback on the Malegam panel recommendations, reports CNBC-TV18's Vidhi Godiawala quoting sources.

The Reserve Bank has been meeting various industry bodies to get their feedback on the Malegam committee report. As per sources close to the development bankers have suggested that the single borrower limit for microfinance institution (MFI) loans should be hiked to Rs 50,000. The committee, however, has recommended a cap of Rs 25,000 on micro loan given to a single borrower. The report also states that 75% of that loan should go for income generation. But bankers argue that if the loan amount is capped at Rs 25,000, the majority of that will go towards consumption and the borrower will not be able to pursue any kind of income generation activities. And hence, they should increase the limit to Rs 50,000. Also, banks have suggested hike in the annual family income to Rs 1 lakh for MFI loans. The Malegam committee report, however, recommends limiting micro loans to borrowers whose annual family income is about Rs 50,000. Banks argue that they would be unable to finance these borrowers with such lower limit. They also say that they won