Microfinance Institutions Network (MFIN) strongly welcomes the decision of the Reserve Bank of India (RBI) to give to its member institution, Bandhan Financial Services Ltd. an “in principle” approval for a banking license. Bandhan is an industry leader in the microfinance space serving over 5 million clients belonging to low income households.
In a country of 1.3 billion people, more than 450 million people are not covered by the formal banking system. Creation of a well regulated infrastructure of institutions for reaching out to the ‘unserved’ and ‘underserved’ segments of the society is a necessary precondition for inclusive growth. NBFC-MFIs have demonstrated their ability to reach out to the Bottom of the Pyramid (BoP) segment. They have developed a business model which is sustainable and commercially viable. And, on an aggregated basis they serve 30 million clients and have a presence in 27 states in 491 districts.
The stated public policy intent of the current policy for new bank license was promotion of financial inclusion. Bandhan Financial Services and many other NBFC-MFIs are well poised to enter the banking fraternity with the specialist bias toward financial inclusion.
Commenting on this landmark decision, Mr. Alok Prasad, CEO, Microfinance Institutions Network (MFIN) stated, “RBI’s decision to give a banking license to Bandhan, the largest NBFC-MFI in the country augurs well not only for the microfinance industry but also for millions of ‘unbanked’ and ‘underbanked’ households in the country. This decision is a striking testimony to the trust and confidence which both the regulator and microfinance clients repose in NBFC-MFIs.”
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| Mr. Alok Prasad, CEO, Microfinance Institutions Network. |
Mr Prasad also commented on the RBI’s intent to announce its guidelines for differentiated banking licenses and said “We believe this will greatly accelerate the pace of financial inclusion. Many of our member institutions are well geared to transform themselves into regular banks. A differentiated banking licensing regime will allow NBFC-MFIs to seamlessly move into the formal banking space and further integrate themselves into the mainstream financial architecture.”
About Microfinance Institutions Network
Microfinance Institutions Network (MFIN) is the premier industry association for the microfinance industry in India and its current membership consists of 44 leading NBFC (Non-banking Financial Company) Microfinance Institutions (MFIs) in the country. The aggregate business of MFIN members constitutes over 85 per cent of the Indian microfinance industry (excluding SHGs). MFIN seeks to work closely with regulators and other key stakeholders to achieve larger financial inclusions goals through microfinance.
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