Press Information Bureau

Government of India

Ministry of Finance

25-November-2016 17:25 IST

Micro Finance Institutions (MFIs) in India can operate in different forms- Non-Banking Financial Companies - Micro Finance Institutions (NBFC-MFIs), Trusts, Societies etc. Depending upon the nature of organisational structure, ownership, level of operations etc., MFIs are regulated under extant laws and guidelines of the Reserve Bank of India (RBI) and money lending laws of State Governments.

RBI regulates microfinance entities which are having corporate (company) legal structures i.e. NBFC-MFIs. NBFC-MFIs are regulated by RBI under the provisions of Chapter IIIB of the RBI Act, 1934. RBI has issued regulatory guidelines and Fair Practice Code for these NBFC-MFIs. RBI has given recognition to two Self Regulatory Organisations (SROs). MFIs which are members of these Self Regulatory Organisations (SROs) also adhere to a voluntary industry Code of Conduct.

This was stated by Shri Santosh Kumar Gangwar, Minister of State in the Ministry of Finance in written reply to a question in Lok Sabha today.

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DSM/KA

Regulation of microfinance entities clarifies oversight and compliance requirements for corporate and non corporate providers in India. Regulatory oversight of microfinance is allocated by organisational form: corporate entities operating as NBFC-MFIs are regulated by the Reserve Bank with specific guidelines and a Fair Practice Code, while trusts, societies and other non-corporate forms are governed by State money lending laws; two recognised Self Regulatory Organisations promote a voluntary industry Code of Conduct for member MFIs.