The mutually accepted code of conduct, or MACC, in short has been in vogue for over a year while it could not be implemented since several banks and small finance banks are not signatories to this.
“Signing the code will be like saying ‘I am a responsible lender’,” said Manoj Nambiar, head of the steering group for the code which has representations from Indian Banks’ Association, Finance Industry Development Council, Sa-Dhan and MFIN.
The group proposed stringent rules such as bar on lending without credit bureau clearance and to non-performing loan accounts at its meeting on Wednesday.
“We plan to name and shame the lenders who will not take part in this exercise by sending the list to RBI, rating agencies and investors. We will also prepare quarterly report if there are violations,” said Nambiar, who is managing director of Arohan Financial Services. “The code of conduct has been put in place last year but we are now strengthening its implementation which was not thought through properly earlier,” he said.
Banks and small finance banks control 38% and 27% of the Rs 1.37 lakh crore microfinance market. NBFC-MFIs enjoy 28% market share while the NBFCs control 6%, and non-profit MFIs the rest 1%.
The steering group has also proposed raising the per borrower loan limit to Rs 1 lakh from Rs 80,000 from three or four lenders across the lender groups. Reserve Bank of India rule says Rs 1 lakh cap from two MFI lenders while did not put any limit for banks’ lending to women micro borrowers.
“When more lenders come within the ambit of the code, Rs 80,000 may be too restrictive. So we are considering moving it in line with the RBI ceiling,” MFIN chief executive Harsh Shrivastava said.
The previous cap of Rs 80000 under the joint liability group model was introduced earlier this April to cover inflation of recent years, raised from Rs 60000 which was in force since 2013.
The code in its latest form is likely to be implemented from January next year.