Mumbai, Nov. 22: Amid the crisis in the micro finance industry, former Reserve Bank governor Dr Y. V. Reddy on Monday said the micro finance institutions (MFIs) should be regulated as they are no better than money lenders.
“Profit-seeking MFIs should be studied as they do not come under the laws relating to money lending or usury. After all, they are no better than money lenders,” Mr Reddy said.
The Reserve Bank is also setting up a panel to look into the entire gamut of MFI. “Micro finance is a respectable area, and the impressive profitability of our profit-seeking MFIs has attracted investments from private equity funds globally. There may therefore be merit in a detailed analysis in a sort of supervisory review, to check any incipient tendency towards irresponsible usurious lending by such profit-seeking MFIs,” Mr Reddy said.
The comments from the former central banker, comes at a time when the MFI industry is reeling under a severe crisis.