The parliamentary standing committee headed by former finance minister Yashwant Sinha has proposed a unified and independent regulator to govern microfinance institutions (MFIs), along the lines of other sector regulators like Insurance Regulatory and Development Authority (Irda) and the Pension Fund Regulatory and Development Authority (PFRDA). The report is yet to be tabled in the Parliament. The recommendation is in sharp contrast to the structure proposed in the Microfinance Bill, one of the major initiatives of the UPA government, which had envisaged RBI as the sole regulator for the sector. The apex bank had objected to this saying it doesn’t have the wherewithal to regulate all MFIs, except those that are incorporated as non-banking financial companies (NBFCs). There was also a proposal to entrust the responsibility to NABARD, but the development bank did not take it up. The Sinha committee proposes that such a regulator will have representatives from RBI, NABARD and SIDBI, besides nominees from central government and MFIs. However, the proposed national regulation -The Microfinance Institutions (Development and Regulation) Bill – is set to lapse for the second time since 2007.
