BANKING AFFAIRS

Detailed explanation-1: -Regulatory approach towards microfinance has been largely based on the recommendations of the Malegam Committee. The key recommendations of the Malegam Committee were as follows: Creation of a separate category of NBFC operating in the microfinance sector to be designated as NBFC-MFI.

Detailed explanation-2: -The Committee had recommended that net owned funds should be in form of Tier I capital, and has set the minimum capital for NBFC-MFIs at Rs 15 Crore. These recommendations essentially restrict MFI promoters to corporates, or individuals backed by investors with significant capital.

Detailed explanation-3: -A Self Help Group (SHG) is a financial intermediary committee usually composed of 10–20 local women or men who provide financial assistance to its members by providing them finance in the a minimal interest rate. It is a part of micro financing as the amount of the loan is very minimum due to small group of people.

Detailed explanation-4: -3.1 A microfinance loan is defined as a collateral-free loan given to a household having annual household income up to ₹3, 00, 000. For this purpose, the household shall mean an individual family unit, i.e., husband, wife and their unmarried children.

Detailed explanation-5: -Like a bank, a microfinance institution is a provider of credit. However, the size of the loans are smaller than those granted by traditional banks. These small loans are known as microcredit. The clients of an MFI are often microentrepreneurs in need of economic support to launch their business.