Microfinance non-banking finance companies for financial inclusion

Chennai, Aug 6 (IANS) There should be a separate category of micro-finance non-banking finance companies (MFNBFC) to act as correspondent banks for larger banks and help financial inclusion, the Prime Minister’s Economic Advisory Council Chairman, C. Rangarajan, said Friday.

Inaugurating a conference organised by Union Bank of India and the Great Lakes Institute of Management near here, he said financial inclusion is a compulsion and not an option.

‘There should not be any relaxation in start up capital and other regulatory norms applicable for NBFC in the case of MFNBFCs. The business facilitator and correspondent model have to be effectively implemented for financial inclusion.’

Rangarajan said MFNBFC can be classified as NBFCS that provide credit up to a specified amount and act as business correspondent for banks providing savings and remittance services.

Noting that the business correspondent model has not taken off, he urged the banks to remove the hurdles that hinder its smooth functioning and growth.

He said individuals like ex-servicemen can also be permitted to function as business facilitators.

He aslso said while there was a need for a mechanism to solve disputes between financial sector regulators, their autonomy should not be diluted.

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