NBFC-MFI
- May 31, 2022
- Posted by: OptimizeIAS Team
- Category: DPN Topics
NBFC-MFI
Context:
stressed assets of non-banking financial companies- microfinance institutions (NBFC-MFIs) are estimated to have declined to around 14 per cent as of March 2022 from close to 22 per cent in September 2021, helped by revival in the economy and limited impact of the omicron variant, says a report.
NBFC-MFI:
The NBFC-MFI is a non-deposit taking financial company.
Conditions to qualify as NBFC-MFI:
- Minimum Net Owned Funds (NOF) of Rs. 5 crore.
- At least 85% of its Net Assets in the nature of Qualifying Assets.
- The Qualifying Assets are those assets which have a substantial period of time to be ready for its intended use or sale.
The difference between an NBFC-MFI and other NBFC is that while other NBFCs can operate at a very high level, MFIs cater to only the smaller level of social strata, with need of smaller amounts as loans.
“Qualifying assets” are loans that meet below specifications:
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Stress Resolution Framework 2.0:
Resolution Framework 2.0 announced by the Reserve Bank of India (RBI) in the wake of the second Covid-19 wave. This Framework is to relieve stress faced by most vulnerable categories of borrowers – namely individuals, borrowers and MSMEs.
- Individuals, borrowers and MSMEs with aggregate exposure up to Rs. 25 crore, who have not availed restructuring under any previous frameworks, but classified as standard on 31 March, 2021, will be eligible to be considered under Resolution Framework 2.0.
- This can be invoked till September 30, 2021 and will have to be implemented within 90 days after invocation.
- For individuals and small businesses who have availed restructuring of loans under Resolution Framework 1.0, where moratorium of less than 2 years was permitted, lending institutions can now increase the period and/or extend residual tenure up to a total period of 2 years.
- In respect of small businesses and MSMEs restructured earlier, lending institutions are now permitted to review working capital sanction limits, as a one-time measure.