Understanding Micro Finance Institution Committees in India

The question asks about the specific committee formed in 2010 to address issues and concerns within the Micro Finance Institution (MFI) sector in India. This period was significant for MFIs, particularly due to a crisis that unfolded in Andhra Pradesh.

Context: Issues in the MFI Sector in 2010

Around 2010, the Micro Finance Institution sector faced several challenges. Reports of coercive recovery practices, high interest rates charged by some MFIs, and borrower over-indebtedness became prominent, leading to regulatory concerns and a crisis in Andhra Pradesh.

To examine these issues and suggest regulatory measures, the Reserve Bank of India (RBI) felt the need to constitute an expert committee.

Analyzing the Options for the MFI Committee

Let's look at the committees mentioned in the options:

• Ghosh Committee: This committee, formed by the RBI much earlier, dealt with issues related to non-banking financial companies (NBFCs), but not specifically focused on the MFI sector's crisis in 2010.
• Sivaraman Committee: This committee is famous for recommending the establishment of the National Bank for Agriculture and Rural Development (NABARD) in 1979. It predates the significant growth and regulation challenges of modern MFIs.
• Malegam Committee: The RBI constituted a Sub-Committee of the Central Board to study issues and concerns in the Micro Finance Institution (MFI) sector. This committee was indeed formed in 2010 and was headed by Mr. Y.H. Malegam. Its mandate was specifically to look into the definition of MFIs, interest rates, and other regulatory aspects following the Andhra Pradesh crisis.
• Khan Committee: There have been various committees headed by individuals named Khan concerning different aspects of the financial sector at different times, but none are specifically known for studying MFI issues in 2010 in response to the crisis in the same way the Malegam Committee was.

The Role of the Malegam Committee

The Malegam Committee was a crucial response by the RBI to the challenges faced by the Micro Finance Institution sector in 2010. Its key objectives included:

• Examining the definition of MFIs.
• Studying the practices related to interest rates and other charges levied by MFIs.
• Recommending appropriate regulatory and supervisory framework for MFIs registered as NBFCs.

The recommendations of the Malegam Committee significantly influenced the regulatory guidelines issued by the RBI for NBFC-MFIs.

Conclusion

Based on the historical context and the specific mandate of the committees listed, the committee constituted in 2010 to study the issues and concerns in the Micro Finance Institution sector was the Malegam Committee.

Revision Table: Key Indian Financial Committees

Additional Information: Regulation of Micro Finance Institutions (MFIs)

Following the recommendations of the Malegam Committee and subsequent developments, the regulatory landscape for Micro Finance Institutions in India has evolved. MFIs registered as Non-Banking Financial Companies (NBFCs) are primarily regulated by the Reserve Bank of India (RBI). The regulations cover aspects like interest rate caps (though later deregulated with fair practices code), capital adequacy, and lending practices to protect borrowers and ensure the health of the Micro Finance Institution sector. The goal is to promote financial inclusion responsibly.