Curbs on current account affecting MFIs: Sa-dhan

The revised guidelines from the RBI pertaining to current accounts will lead to numerous difficulties and operational issues for the microfinance sector, industry body Sa-Dhan, said in a letter to RBI Governor Shaktikanta Das.

Sa-dhan demanded that microfinance institutions be exempted from the restrictions on the opening and operation of current accounts. In the recent circular, RBI instructed banks not to open current accounts for customers who had availed credit facilities in the form of cash credit (CC)/ overdraft (OD) from the banking system and said all transactions shall be routed through the CC/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,” P. Satish, executive director – Sa-Dhan, said.

The industry body reasoned that microfinance institutions (MFIs) have various current accounts with banks based on the location of their branches.

“Since demonetisation, all loan disbursements of MFIs are being credited to the bank accounts of their borrowers. Many MFIs also have ECS mandates for loan collections. Such banks may or may not have CC/OD facilities extended to such MFIs,” Sa-Dhan said.

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