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Time of India
10-06-2025
- Business
- Time of India
Mis-selling: RBI looks at tighter rules
RBI Deputy Governor M. Rajeshwar Rao MUMBAI: RBI may introduce tighter regulations to curb mis-selling of financial products, especially in cases where customer suitability and appropriateness are overlooked. "It is concerning that such mis-selling without regard to suitability and appropriateness would beget distrust in schemes aimed at providing a safety net," said RBI deputy governor Rajeshwar Rao, cautioning that such practices could weaken trust in the formal financial system. To address this, the central bank is considering enhanced disclosure norms, stricter product suitability frameworks, and mandatory audits of sales processes followed by regulated entities. Rao said regulated entities need to "analyse the gaps and strengthen their processes to reverse the trend". Speaking at a financial inclusion forum recently, Rao said access to finance should not be treated as charity but as a strategic necessity. "Financial inclusion should not be viewed as an act of philanthropy, but rather as a strategic investment in the nation's economic and social development," he said. "Even lenders having access to low-cost funds have been charging margins higher than the rest of the industry and which in several instances appear to be excessive," said Rao RBI is also examining the possibility of mandating product suitability assessments, especially when dealing with vulnerable or first-time users. "It is important that products meant for vulnerable sections are not sold with a 'one-size-fits-all' approach," Rao said. He added that financial inclusion should not compromise appropriateness. The surge in consumer complaints, which rose 33% year-on-year, has prompted RBI to consider strengthening grievance redress mechanisms. Rao pointed to the increase in complaints received by the ombudsman and said this called for "better complaint handling mechanisms, possibly with time-bound resolution and automated complaint tracking." He indicated that penalties may be introduced for non-compliance with revised grievance norms. On the tech front, RBI may update its guidelines to regulate the use of AI, ML, and blockchain in financial services. Rao said responsible innovation must be guided by principles of fairness, transparency, and data protection. The proposed Unified Lending Interface is expected to move closer to implementation. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
Business Recorder
09-06-2025
- Business
- Business Recorder
India central bank deputy flags concerns in microfinance sector, urges reforms
MUMBAI: India's microfinance sector continues to grapple with high interest rates, rising borrower over-indebtedness, and coercive recovery practices, highlighting the need for urgent lender reforms, a deputy governor of the central bank said. 'The (microfinance) sector continues to suffer from vicious cycle of over-indebtedness, high interest rates and harsh recovery practices,' M. Rajeshwar Rao said at an event in Mumbai on June 5. The speech was uploaded on the central bank's website on Monday. Indian banks have reported stress in the microfinance segment since the beginning of the current financial year, largely due to high borrower indebtedness, declining rural incomes, and election-related disruptions Indian central bank's FX forward book shrinks to $52.48 billion Even lenders with access to low-cost funds have been found to be charging significantly higher margins than the industry norm, which in several instances appear excessive, Rao said. While some moderation in interest rates on microfinance loans has been observed in recent quarters, pockets of high interest rates and elevated margins continue to persist, Rao said in the speech. Rao urged lenders to look beyond the conventional 'high-yielding business' tag for the microfinance sector, adding that there is a need to strengthen credit assessments to prevent borrower over-leverage and strictly avoid coercive recovery practices. Despite sound business models, he pointed out that organizational structures and incentive schemes might be flawed, resulting in 'perverse' outcomes for customers. 'This calls for an introspection around the models,' he added.
Time of India
09-06-2025
- Business
- Time of India
RBI deputy flags concerns in microfinance sector, urges reforms
India's microfinance sector continues to grapple with high interest rates, rising borrower over-indebtedness, and coercive recovery practices, highlighting the need for urgent lender reforms , a deputy governor of the central bank said. "The (microfinance) sector continues to suffer from vicious cycle of over-indebtedness, high interest rates and harsh recovery practices," M. Rajeshwar Rao said at an event in Mumbai on June 5. The speech was uploaded on the central bank's website on Monday. Indian banks have reported stress in the microfinance segment since the beginning of the current financial year, largely due to high borrower indebtedness, declining rural incomes, and election-related disruptions Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Moose Approaches Girl At Bus Stop In Haryana - Watch What Happens Happy in Shape Undo Even lenders with access to low-cost funds have been found to be charging significantly higher margins than the industry norm, which in several instances appear excessive, Rao said. While some moderation in interest rates on microfinance loans has been observed in recent quarters, pockets of high interest rates and elevated margins continue to persist, Rao said in the speech. Live Events Rao urged lenders to look beyond the conventional "high-yielding business" tag for the microfinance sector, adding that there is a need to strengthen credit assessments to prevent borrower over-leverage and strictly avoid coercive recovery practices. Despite sound business models, he pointed out that organizational structures and incentive schemes might be flawed, resulting in "perverse" outcomes for customers. "This calls for an introspection around the models," he added.
Yahoo
09-06-2025
- Business
- Yahoo
India cenbank deputy flags concerns in microfinance sector, urges reforms
MUMBAI (Reuters) -India's microfinance sector continues to grapple with high interest rates, rising borrower over-indebtedness, and coercive recovery practices, highlighting the need for urgent lender reforms, a deputy governor of the central bank said. "The (microfinance) sector continues to suffer from vicious cycle of over-indebtedness, high interest rates and harsh recovery practices," M. Rajeshwar Rao said at an event in Mumbai on June 5. The speech was uploaded on the central bank's website on Monday. Indian banks have reported stress in the microfinance segment since the beginning of the current financial year, largely due to high borrower indebtedness, declining rural incomes, and election-related disruptions Even lenders with access to low-cost funds have been found to be charging significantly higher margins than the industry norm, which in several instances appear excessive, Rao said. While some moderation in interest rates on microfinance loans has been observed in recent quarters, pockets of high interest rates and elevated margins continue to persist, Rao said in the speech. Rao urged lenders to look beyond the conventional "high-yielding business" tag for the microfinance sector, adding that there is a need to strengthen credit assessments to prevent borrower over-leverage and strictly avoid coercive recovery practices. Despite sound business models, he pointed out that organizational structures and incentive schemes might be flawed, resulting in "perverse" outcomes for customers. "This calls for an introspection around the models," he added. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
The Hindu
23-05-2025
- Business
- The Hindu
RBI gives ₹2.69 lakh crore dividend to Central govt for FY25
The Reserve Bank of India (RBI) on Friday (May 23, 2025) approved the transfer of ₹2,68,590.07-crore as surplus to the Central Government for the accounting year 2024-25. Under the the Chairmanship of RBI Governor Sanjay Malhotra, the decision was made in the 616th meeting of the Central Board of Directors of the Reserve Bank of India. RBI in a statement said, 'During accounting years 2018-19 to 2021-22, owing to the prevailing macroeconomic conditions and the onslaught of the Covid-19 pandemic, the Board had decided to maintain the CRB at 5.50% of the Reserve Bank's Balance Sheet size to support growth and overall economic activity.' 'The CRB was increased to 6.00% for FY 2022-23 and to 6.50% for FY 2023-24. Based on the revised ECF, and taking into consideration the macroeconomic assessment, the Central Board decided to further increase the CRB to 7.50%. The Board thereafter approved the transfer of ₹2,68,590.07 crore as surplus to the Central Government for the accounting year 2024-25,' the RBI said in a statement. 'The Board reviewed the global and domestic economic scenario, including risks to the outlook. The Board also discussed the working of the Reserve Bank during the year April 2024 – March 2025 and approved the Reserve Bank's Annual Report and Financial Statements for the year 2024-25,' the RBI said. 'The transferable surplus for the year (2024-25) has been arrived at on the basis of the revised Economic Capital Framework (ECF) as approved by the Central Board in its meeting held on May 15, 2025. The revised framework stipulates that the risk provisioning under the Contingent Risk Buffer (CRB) be maintained within a range of 7.50 to 4.50% of the RBI's balance sheet,' it added. The meeting was attended by Deputy Governors M. Rajeshwar Rao, T. Rabi Sankar, Swaminathan J., Dr. Poonam Gupta and other Directors of the Central Board – Ajay Seth, Secretary, Department of Economic Affairs, Nagaraju Maddirala, Secretary, Department of Financial Services, Satish K. Marathe, Revathy Iyer, Prof. Sachin Chaturvedi, Pankaj Ramanbhai Patel and Dr. Ravindra H. Dholakia.
