Insta
Lenders Forcing Micro-Financiers To Park FDs With Them As Security Against Fresh Advances: Report
Swarajya Staff
Sep 01, 2021, 12:21 PM | Updated 12:21 PM IST
Save & read from anywhere!
Bookmark stories for easy access on any device or the Swarajya app.
Small and medium-sized micro financiers are being forced by some lenders to keep their fixed deposits with them as security against fresh advances, even though exposures to micro-lenders are guaranteed by the government.
Back in June, the central government had rolled out a credit guarantee scheme covering 75 per cent of bank loans to micro-finance institutions (MFIs) in case of defaults.
“Several banks -- both in the public sector and private sector -- are forcing small and medium sized MFIs to park fixed deposits with them as a security against loans,” micro lenders industry body Sa-Dhan executive director P Satish confirmed to the Economic Times.
He added, “This is despite the government's guarantee on bank loans to MFIs.”
In June, Union Finance Minister Nirmala Sitharaman had assured guarantee to banks for loans to NBFC-MFIs or MFIs on lending up to Rs 1.25 lakh. Even the interest rate by banks for loans under this scheme was restricted to about 2 per cent above the bank’s marginal cost based lending rate (MCLR).
The scheme overall targets increasing the flow of credit to about 2.5 million micro borrowers after the lending to them was slowed down by MFIs following the Covid-19 pandemic.
However, this new insistence by banks is reportedly defeating the purpose of this scheme and the Department of Financial Services (DFS) has apparently been apprised of these developments as well.
Save & read from anywhere!
Bookmark stories for easy access on any device or the Swarajya app.
Support Swarajya's 50 Ground Reports Project & Sponsor A Story
Every general election Swarajya does a 50 ground reports project.
Aimed only at serious readers and those who appreciate the nuances of political undercurrents, the project provides a sense of India's electoral landscape. As you know, these reports are produced after considerable investment of travel, time and effort on the ground.
This time too we've kicked off the project in style and have covered over 30 constituencies already. If you're someone who appreciates such work and have enjoyed our coverage please consider sponsoring a ground report for just Rs 2999 to Rs 19,999 - it goes a long way in helping us produce more quality reportage.
You can also back this project by becoming a subscriber for as little as Rs 999 - so do click on this links and choose a plan that suits you and back us.
Click below to contribute.