Concept: Malegam Committee
Topic: Fiscal Policy
CNA mentions: 1 (June 22)
The Board of Directors of the Reserve Bank of India, formed a Sub-Committee of the Board to study matters and concerns in the microfinance sector in so far as they are related to the entities regulated by the Bank. The Sub-Committee was under Y.H. Malegam being the Chairman. The terms of mention of the Sub-Committee included framing the description of ‘microfinance’ and ‘Micro Finance Institutions (MFIs)’ for the point of regulation of non-banking finance companies (NBFCs) undertaking microfinance by the Reserve Bank of India and do proper recommendations. Also, the committee had to look at the widespread activities of MFIs in relation to interest rates, lending and recovery measures to identify trends that impose on borrowers’ interests.
Malegam Committee Recommendations
- A separate category of non-banking finance companies be created for those operating in the microfinance sector to be designated as NBFC-MFI.
- The committee recommended certain conditions to be satisfied for NBFCs to be classified as NBFC-MFI:
- Not less than 90% of its total assets (other than cash and bank balances and money market instruments) are in the nature of “qualifying assets.”
- The income it derives from other services is in accordance with the
regulation specified in that behalf.
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