The Reserve Bank of India has expressed concern at the uneven growth of micro finance institutions across the country and the diverse rates of interest being charged of their members.
While pointing out that it has been the endeavour of the central bank to foster an enabling environment for the growth and development of this sector, Vepa Kamesam, deputy governor, RBI, said, "In order to enable further growth and development of micro finance institutions, however, it is necessary to identify policy measures relating to the micro finance industry."
The micro finance sector now covers over 700,000 self help groups, which enjoy bank credit of over Rs 2,000 crore (Rs 20 billion).
Micro finance institutions have brought the poor, especially poor women, into the formal financial system and enabled them to access credit and fight poverty.
Kamesam chaired a high level meeting on August 6 to discuss recommendations of four informal groups, which were formed in October 2002, to study issues relating to (a) structure and sustainability (b) funding (c) regulations and (d) capacity building of the micro finance institutions.
Kamesam suggested that greater public debate was required before a view could be taken, particularly on regulatory issues.
The RBI will circulate reports of the groups among all banks and elicit their responses within a month.
Thereafter, the central bank will segment the recommendations in three groups (1) those which are implemented readily by banks (2) those which are difficult to implement and need further study and (3) areas which need further examination, including legal aspects.
The high-level meeting was attended by chiefs of Indian Bank and United bank of India, chairman and managing director of Small Industries Development Bank of India and senior executives of State Bank of India, select public and private banks, regional rural banks, district central co-operative banks, National Bank for Agriculture and Rural Development and micro finance institutions.