PPT gives overview of MFI regulation as released by RBI on December 2011

1. RBI’s Guidelines for NBFC MFI
December 2011
Riskpro, India
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2. RBI now regulates MFI industry
 A Sub-Committee of the Central Board of the Reserve Bank (Chairman: Shri Y. H.
Malegam) was constituted to study issues and concerns in the MFI sector
 RBI has introduced Micro Finance Institutions(MFIs) as a new category of Non Banking
Financial Companies (NBFC).
 The RBI said that NBFC-MFI will have the following features
 Will be a non Deposit taking NBFC.
 Have minimum net owned funds of Rs 5 crores
 Not less than 85% of its net assets being under qualifying assets.
 A major move to regulate a very sensitive financing sector
 Aims at ensuring consumer protection
Definition of NBFC - MFI
An NBFC-MFI is defined as a non-deposit taking NBFC(other than a company licensed under Section
25 of the Indian Companies Act, 1956) that fulfils the following conditions:
i. Minimum Net Owned Funds of Rs.5 crore (Rs 2Cr for certain MFIs)
ii. Not less than 85% of its net assets are in the nature of “qualifying assets.”
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3. Regulatory Requirements for MFI
 Comply with Corporate Governance regulation for NBFC
 Investments in Information Technology for better control, procedures and reduced costs
 All NBFC MFI need to comply with following Regulatory Requirements.
 Maintain net owned funds of Rs 5crores.
 Capital adequacy of 15% of aggregated risk weighted assets
 Asset Classification
 Standard asset - No default
 Nonperforming – Interest/principal payment has remained overdue for over 90 days
85% of lending activity to be of High Quality for investor protection.
85% Such “Good loans” comply with following.
1. Borrower’s annual income : Rural area - Less than Rs 60,000 /Urban less than Rs 1,20,000
2. Total Loan : Max Rs. 50,000
3. Tenure : Minimum 2 years for loans over Rs 15,000
4. No prepayment penalty
5. Lending without collateral;
6. Repayment of instalments (weekly, fortnightly or monthly instalments) at the choice of the borrower
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4. Consumer protection under MFI Regulations
 All NBFC-MFIs shall maintain an aggregate margin cap of not more than 12%.
 NBFC-MFIs shall not collect any Security Deposit/ Margin
 Standard form of loan agreement
 Not more than two NBFC-MFIs should lend to the same borrower
 All sanctioning and disbursement of loans should be done only at a central location and more than
one individual should be involved in this function
Transparency of Interest Rates
 Interest on individual loans will not exceed 26% per annum
 Processing charges shall not be more than 1 % of gross loan amount
 Effective rate of interest charged by the NBFC-MFI should be prominently displayed in all its offices
 No penalty charged on delayed payment
 Loan card (similar to a Bank pass book) with details provided to each Borrower
Recovery
 Ensure Code of Conduct and systems are in place for recruitment, training and supervision of
recovery staff
 Recovery only at Central office. If Borrower fails to appear there, then recovery at office/residence
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5. Who is Riskpro… Why us?
ABOUT US MISSION
 Riskpro is an organisation of member firms
around India devoted to client service  Provide integrated risk management
excellence. Member firms offer wide range consulting services to mid-large sized
of services in the field of risk management. corporate /financial institutions in India
 Currently it has offices in three major cities  Be the preferred service provider for
Mumbai, Delhi and Bangalore and alliances complete Governance, Risk and Compliance
in other cities. (GRC) solutions.
 Managed by experienced professionals with
experiences spanning various industries.
VALUE PROPOSITION DIFFERENTIATORS
 You get quality advisory, normally delivered
by large consulting firms, at fee levels  Risk Management is our main focus
charged by independent & small firms
 Over 200 years of cumulative experience
 High quality deliverables
 Hybrid Delivery model
 Multi-skilled & multi-disciplined organisation.
 Ability to take on large and complex projects
 Timely completion of any task due to delivery capabilities
 Affordable alternative to large firms  We Hold hands, not shake hands.
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6. Risk Management Advisory Services
Basel II/III Advisory Corporate Risks Information Security
 Market Risk  Enterprise Risk Assessment  IS Audit
 Credit Risk  Fraud Risk  Information Security
 Operational Risk  Risk based Internal Audit  IT Assurance
 ICAAP  Operations Risk  IT Governance
 Forensic services
SERVICES
Operational Risk Governance Other Risks
 Process reviews  Corporate Governance  Business/Strategic Risk
 Policy/ Process Review  Business Strategic risk  Reputation Risk
 Process Improvement  Fraud Risk  Outsourcing Risk
 Compliance Risk  Forensic Accounting  Contractual Risk
Training Recruitment
 Banking – E Learning  Virtual Risk Managers
 Corporate Training  Full Time Risk Professionals
 Regular Risk Management Training  Part time Risk Professionals
 Online Training material
 Risk Managers on call – free
 Workshops / Events
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7. Contacts and Office Locations
Corporate Mumbai Delhi Bangalore
Manoj Jain Rahul Bhan Casper Abraham
Director Director Director
M- 98337 67114 M- 99680 05042 M- 98450 61870
info@riskpro.in
manoj.jain@riskpro.in rahul.bhan@riskpro.in casper.abraham@riskpro.in
www.riskpro.in
Shriram Gokte Raj Sawhney
Principal - Information Risk Principal – Business Risk
M- 98209 94063 M- 99711 03510
shriram.gokte@riskpro.in raj.sawhney@riskpro.in
Ahmedabad Pune Agra
Maulik Manakiwala M.L. Jain Alok Kumar Agarwal
Associate Firm Principal – Strategy Risk Associate Firm
M - 91 9825640046 M- 9822011987 M- 99971 65253
mljain@riskpro.in
Gourav Ladha
Sap Risk Advisory
M- 97129 52955
THANKS
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