SKS Microfinance, Spandana Sphoorty Financial Ltd and Sambandh Financial — all RBI-regulated NBFC-Microfinance Institutions have faced closure briefly as the district administration said they were not licensed.
However, they were allowed re-open when the RBI gave clarification that they were allowed to do micro-credit business anywhere in India, as the RBI jurisdiction extends throughout the country though some officials in Jharkhand are still unaware of the central banker’s purview.
However, the brief closure also indicates that the district administration should also facilitate microfinance institutions more amicably instead of letting the poor and low income households fall prey to money lenders who charge high interest rates and adopt illegal means to recover money.
Most of the present microfinance institutions are governed by RBI’s code of conduct since 2013, following the Andhra Pradesh microfinance crisis over 50 suicides owing to indebtedness to MFIs.
In a statement, MFIN (Microfinance Institutions Network), a self-regulatory body recognized by the RBI, said, "These microfinance companies are operating in the Dumka district of Jharkhand as the oldest and reliable entities. Due to some misunderstanding, the branches of these two recognized NBFC-MFIs were sealed for a short duration by the district administration. Post the verification report from the RBI, these branches were reopened and started operating again."
It further said that the MFIs are the RBI recognized and regulated bodies which provide last mile financial services to the underserved and unbanked population of the country and promotes the Government’s financial Inclusion agenda.