Microfinance Sector Urges Government Backing Amid Rising Stresses

Microfinance institutions are calling for government support and a dedicated funding mechanism to address growing challenges, including regulatory issues and rising delinquencies. A meeting chaired by Financial Services Secretary M Nagaraju underlined these concerns, as the sector sees decelerating credit from banks and rising borrower indebtedness.

The microfinance sector is calling for government intervention and a dedicated funding mechanism to navigate escalating challenges, including regulatory issues and credit delinquencies. The demand emerged following a meeting chaired by Financial Services Secretary M Nagaraju, focused on understanding the obstacles facing this pivotal sector.

At the meeting, Sa-Dhan's Executive Director and CEO Jiji Mammen highlighted concerns about unregulated entities and called for strict measures against coercive recovery practices. He also advocated for making Aadhar a necessary KYC document to standardize procedures across the sector.

The microfinance sector faces stress signals, with credit from banks and NBFCs decelerating, and increasing borrower indebtedness and stress on assets, according to the Reserve Bank's latest report. The sector is urging a revival of dedicated funding mechanisms akin to the Rs 25,000 crore RBI refinance window of the COVID-19 period.

(With inputs from agencies.)