Microfinance institutions (MFIs) have appealed the Reserve Bank of India (RBI) to exclude them from the restrictions imposed on current account and overdraft facility offered by banks in adherence to the new guidelines as it would create operational difficulties for them.
The banking regulator had restricted banks from opening current accounts for those customers who have availed cash credit or overdraft facilities. In its place, all transactions should be channeled through a Cash Credit (CC) or Overdraft (OD) account.
“In the current scenario, when borrowers require urgent credit to restart their lives, implementation of the revised guidelines will result in numerous difficulties and operational issues for the microfinance sector,” said P Satish, executive director of Sa-Dhan.
The sector has pleaded the RBI for reviewing the circular and exclude NBFC-MFIs as well as non-NBFC-MFIs from this new guideline on the restriction of opening and operation of current accounts.
As per Sa-Dhan, MFIs have several current accounts with lenders based on the location of their branches. Since demonetisation, all loan disbursements pertaining to MFIs are credited to the bank accounts of their borrowers. Many MFIs also have ECS mandates for loan collections. Such lenders may or may not offer the CC/OD facilities to such MFIs.
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