Inflation is coming down, but it is still above the central bank's tolerance level, Reserve Bank of India Governor D. Subbarao said. On micro-finance institutions (MFIs), he said that there was need to bring them under some sort of discipline.
Talking to reporters at the State Secretariat after a meeting with Chief Minister Buddhadeb Bhattacharjee and Finance Minister Asim Dasgupta, he said, “Inflation is coming down, but it is still above RBI's tolerance level. Growth, on the other hand, has been encouraging. The government, we know, has revised the growth numbers yesterday [Tuesday] and Reserve Bank of India itself will visit the numbers when it goes for the third quarter review in January.”
To a question on whether the RBI advocated capping of MFI interest rates, Dr. Subbarao said that the RBI was not contemplating that although it would be an issue on the agenda of Thursday's meeting of the RBI board. “We cannot take a view on whether there must be a cap on interest rates charged by MFIs but by and large, it is felt that there should be some method of bringing MFIs under some sort of discipline,” he said.
The RBI Governor said that any action would only be after the Malegam Committee submits in January its report on MFIs. He said that in respect of MFIs there were three areas of concern. This included the rate of interest, lending practices and coercive recovery methods.
However, the central bank governor did not agree that West Bengal was facing a financial crisis. He said that there was no discussion on this matter. Credit-deposit ratio was indeed lower in West Bengal as compared to the national average and he would take up the matter with the bank chiefs at tomorrow's [Thursday] meeting. “The Chief Minister also wanted a briefing on this,” he said.
Dr. Dasgupta said that discussions were useful and the two major areas covered were financial inclusion and social regulation of MFIs. He said that a road map has been worked out for covering 2,581 unbanked villages of the State (from among 7,486) by March 2012 and the need for expediting the exercise was presented before the Governor.
Dr. Subbarao stressed on the need for a brick-and-mortar presence as also road and net connectivity for the banking correspondent model to work. “Other states have done well in this respect and West Bengal has done reasonably well,” he said.
He said that he had advised the state government to study the nature and activities of the MFIs here. Dr. Dasgupta said that there were 21 MFIs about whom the State government had some concerns. “They are registered with some bodies on which the state has no control,” he said adding that “We will wait for the Malegam report as action has to be taken in tandem.”