Mumbai: Micro Finance Institutions Network (MFIN), the umbrella body of micro-finance companies, will be seeking the Reserve Bank's approval to become a self- regulatory organisation by the end of the month.
"We have received approval from our board and will soon apply (to become an SRO)... Maybe by the end of this month," MFIN Vice-President Chandra Shekhar Ghosh said.
He said the association has put in place most of the requirements which the RBI has asked for and rest of them will be in place soon.
Last month, the central bank had said it would recognise industry associations as self-regulatory organisations (SROs) of non-banking financial companies that are engaged in micro finance (NBFC-MFIs) based on the recommendations made by the Y H Malegam committee.
The committee was formed to study the issues and concerns in the micro-finance sector in the wake of the MFI crisis following the Andhra ordinance in October 2010 that sought to control the MFIs big way.
The RBI had said that for an association to become an SRO, it will have to adhere to a set of functions and responsibilities such as formulating and administering a code of conduct, having a grievance and dispute redressal mechanism for clients, responsibility of ensuring borrower protection, monitoring compliance by NBFC-MFIs with the regulatory framework, and submission of its financials and annual report, among others.
"We have been practising most of the things which RBI has asked for being recognised as an SRO. It is just that after the licence (status) we will come under the permitted regulatory environment," Ghosh added.
The MFIN has 42 NBFC-MFI members, which include SKS Microfinance, Bandhan, Grameen Financial Services, and Trident Microfin, L&T Finance, Ujjivan, and Muthoot Fincorp among others.
The RBI had said the membership of NBFC-MFIs in the industry association/SRO would be seen by the trade, borrowers and lenders as a mark of confidence and removal from membership will be seen as having an adverse impact on the reputation of such removed NBFC-MFIs.
However, the central bank said while membership to the SRO is not mandatory, NBFC-MFIs are encouraged to voluntarily become members of at least one SRO.
Apart from MFIN, Sa-Dhan is another major MFI association operating in the country.