Discussion
With reference to the Micro Finance Institutions consider the following statement.
(i) At present Micro Finance Institutions (MFls) obtain finance from banks according to RBI guidelines.
(ii) MFIs provide small scale credit to low income households and small informal businesses.
Which of these statement is/ are correct?
Answer: B
Correct answer: Both (i) and (ii)
Both statements are correct. Statement (i) - Microfinance Institutions do draw a large share of their funds from banks, and that lending sits inside the RBI’s framework: bank credit to MFIs for on-lending qualifies as priority sector lending subject to RBI conditions, and MFIs organised as NBFC-MFIs are themselves registered with and regulated by the RBI. Statement (ii) - this is simply what an MFI is. They extend small-value collateral-free loans, typically through joint-liability groups, to low-income households and to tiny informal enterprises that ordinary banks find uneconomic to serve. Since neither statement contains an error, the answer is that both are correct. The record had been keyed to “Only (ii)”, which wrongly treats the RBI’s role in statement (i) as false.
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