Microfinance muddle in draft pension norms

But there is a glitch with microfinance institutions’ loans. Says an RBI official, ‘‘There is no provision for registering micro-finance institutions (MFIs) with RBI. But Non-Banking Finance Companies (NBFCs) engaged in microfinance are registered with RBI under the NBFC regulations.’’

RBI doesn’t fund MFIs either. The official clarifies, ‘‘As announced in Budget 2006, the MicroFinance Development Fund (MFDF) — redesignated as ‘Microfinance Development and Equity Fund’ — will be managed by a board consisting of representatives of Nabard, commercial banks and professionals with domain knowledge.’’ MFIs can access this corpus, which has been doubled to Rs 200 crore.

In this context, when asked if RBI guarantees any loans of micro-finance institutions and under what conditions, the RBI officer replied, ‘‘RBI does not guarantee any MFI. At present, there are no such plans (either).’’

What, then, is the PFRDA talking about when they listed RBI-guaranteed microfinance institutions’ loans as an investment instrument?

A PFRDA official explained the anomaly. ‘‘We didn’t want to leave out MFIs from access to pension fund monies. (But) as a regulator, it will be a mammoth task for us to go and check the credentials of each MFI.’’ The official adds, ‘‘While MFIs may not be approved or guaranteed by RBI now, we have kept this investment option open to PF managers so that they can avail it, if MFIs get such approvals in the future.’’