Where Angels Prey

Where Angels Prey is a novel by Ramesh S Arunachalam. Please refer to www.whereangelsprey.com for more information

Wednesday, October 26, 2011

MFI savings mobilisation: Should they get an okay for tapping into public deposits and low-income clients?

Ramesh S Arunachalam

MFIs should not garner deposits from low-income customers. The RBI, which will become the sole Indian microfinance regulator, also feels so—and there are a number of facts that support the apex bank’s view

There is an ongoing debate on whether MFIs (microfinance institutions) in India should be allowed to access savings from low-income people and/or access public deposits. While opinions range from a strong ‘yes’ to an absolute ‘no’, the debate has reached an emotional high with many stakeholders openly arguing for letting MFIs access savings of low-income people. However, a recent article in Mint suggests that (http://www.livemint.com/2011/10/18190834/RBI-against-letting-MFIs-colle.html), the RBI (Reserve Bank of India), which is to become the sole regulator of microfinance in India, has argued against letting MFIs garner savings from low-income people. It was a huge relief to read this, and without any doubt, the RBI is ‘spot on’ when it says that MFIs should not be permitted to access savings of low-income people.

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