RBI sub-committee to look into functioning of MFIs

Mumbai: Amid growing criticism over the use of coercive methods of microfinance institutions (MFIs) to recover loans, the Reserve Bank of India (RBI) on Tuesday said its sub-panel will look into the functioning of such lenders and submit its report in three months, reports PTI.

"The sub-committee will submit its report in three months," the Reserve Bank said in a statement.

"Y H Malegam, a senior member on the Central Board of Directors of the Reserve Bank of India will chair the sub-committee," it added. Other members of the panel include Kumar Mangalam Birla, Shashi Rajgopalan and RBI deputy governor K C Chakrabarty.

The sub-committee of the central board of directors of the central bank will study the issues and concerns of the microfinance sector, including interest rates charged by the lenders in this area.

The RBI further said that there have been some concerns expressed in the media about high interest rates, coercive recovery processes and multiple lending practised by some microfinance institutions.

The Reserve Bank regulates only those MFIs which are registered with it as non-banking finance companies (NBFCs).

However, it does not prescribe lending rates for these institutions, it added.

Although the registered companies cover over 80% of the microfinance business, in terms of number of companies they constitute a small percentage of the total number of MFIs in the country.

Last week, the Andhra Pradesh government issued an ordinance making registration of microfinance institutions (MFIs) with the state government compulsory.

It aims to rein in microfinance institutions (MFIs), whose coercive tactics led to the death of a number of people in the state recently.

Christened 'Andhra Pradesh MicroFinance Institutions (regulation of money lending) Ordinance, 2010,' the ordinance came into force on 15th October with the governor E S L Narasimhan giving assent to it.

Meanwhile, Microfinance Institutions Network (MFin), an association of 44 MFIs has filed a petition in the Andhra Pradesh High Court challenging the ordinance. The hearing on the petition is expected to come up for hearing today.


Earnings analysis: L&T, HDFC

L&T execution picks up; HDFC disbursements healthy


Net sales: Rs93.4 billion (expected range Rs84.9 billion-Rs95.6 billion)

Net profit: Rs6.94 billion (expected range Rs6.2 billion-Rs8.1 billion)


  • Sales were at the higher end of the expected range and net profit at the lower end.
  • Among its divisions, core engineering & construction and machinery & industrial products recorded very strong growth but electrical & electronics were weak.
  •  Execution has picked up. This was a major worry in Q1.
  •  Margins, flattish, were in line with expectations.
  • Other income was higher as the profit from sale of investment in Satyam (about Rs700 million) and sale of property (another Rs700 million) was included in this quarter itself.
  •  Order inflows were strong (Rs360 billion for the first half now) and were driven by the power & infrastructure segments. L&T's own in-house development projects contributed to 28% of the total inflows (vs. 5% in 1HFY10). Inflows from oil & gas are considerably reduced.
  •  Guidance maintained at 25% order inflow growth and 20% revenue growth for FY11.
  • Management suggested that FY11 margin is likely to remain broadly at FY10 levels of about 13% - however, for that to happen, margins will have to go up in 2H.
  •  L&T Infotech showed a sharp pickup in revenues.
  • Working capital increased to Rs49.5 billion at the end of H1FY11 (40 days of sales) from Rs26.3 billion at the end of FY10 (26 days of sales).
  •  Debt levels went up to Rs77 billion at the end of the first half from Rs68 billion at the end of FY10 - this led to higher interest costs.


NII: Rs10.85 billion (expected range Rs9.7 billion-Rs13.2 billion)
Net profit: Rs8.07 billion (expected range Rs7.6 billion-Rs8.1 billion)


  •  Net profit was at the higher end of the expected range.
  •  Loan growth, at 20%, was in line with expectations.
  • Borrowing costs for NBFCs not yet started picking up, leading to stable margins. Could increase in the December quarter.
  •  Retail disbursements were up 30% y-o-y (63% in Q1); overall disbursements were up 28% y-o-y (25% in Q1).
  •  Did not sell down any loans this quarter.
  • Fee income at Rs681 million was stable y-o-y and up three times q-o-q mainly because of higher corporate business.
  • Spreads were stable q-o-q at 2.34% - competitive pressures have not yet touched HDFC.
  • Contribution from investment-linked income was lower as treasury gains and dividend income declined.
  •  Costs of funds declined q-o-q to just a little under 7%.

(This article is based on secondary research. The report is for information only. None of the stock information, data and company information presented herein constitutes a recommendation or solicitation of any offer to buy or sell any securities. Investors must do their own research and due diligence before acting on any security. Some of the opinions expressed in this article are the author's own and may not necessarily represent those of Moneylife).


Volkswagen Vento: Juvenile love!

The advertising for this car has annoyed us through the print media. And now the TV commercial is trying to make you laugh. What will they unleash on us next?

As if tormenting us with that irritating ‘speaking gizmo’ placed inside the newspaper pages wasn’t bad enough, the Volkswagen suits have unleashed a TV campaign for their new sedan Vento, that makes you want to laugh out loud. For all the wrong reasons. It’s so silly, kids in junior class would come out with better stuff if assigned the creative duties for the brand.

To bring out the passion the Volkswagen engineers feel when putting together this gaadi, the creative route taken is employees sobbing hysterically when the car makes it way out of the factory/showroom!

Just as desi moms weep when the daughter’s doli is being carted away by the baraatis. 'Tears of Perfection' is what they call it.

So the TVC features a plant, where engineers, staffers and other admin chaps weep when it’s time to see-off their beloved Vento. One particularly emotional dude even chases the car on its way out (not kidding). By the way, this would worry me a lot as a customer. I would think there’s fire emanating from the car, and would probably get a stroke, but I digress.

Now, I quite understand why the Volkswagen brand manager chose not to take the rational route. That approach for cars has been done to death. There’s also the possibility that for an entry-level sedan like Vento, there aren’t too many stunning features to harp on. In that context, the emotional route does make sense. So no issues on that score. The problem lies with the extremely stupid rendition of the strategy. Engineers weeping like babies to see the car go is hilarious but for the wrong reasons. It’s like a bad slapstick comedy scene from the sixties cinema. Reminds you of the antics of yesteryear comedians like Rajendranath. The only thing missing is one of the sobbing engineers slipping over a banana peel.

The Vento is an expensive car. It probably costs upward of Rs7 lakh. It’s crazy to dish out such puerile stuff for a product that customers would evaluate a hundred times before closing a deal. This brand needed a deep, powerful emotional idea if the route had to work.

Well, only time will tell how Volkswagen Vento fares in the Indian market place. Right now we know just one thing about the car’s advertising: It first annoys you through the print. And then makes you laugh through the TV. I shudder to imagine what next.




7 years ago

The weeping engineer is quite a different idea, not sure if it works. But I found the latest newspaper ad of vento quite ridiculous. They say "what more the vento comes with body colored bumpers and door handles, mirrors", as if we are living in 1995. Thats utter nonsense for a so-called premium brand (atleast in India) to harp as USP. I mean today all cars incl Nano have the body colored effect. In fact the irony is that their base model has black colored handles and mirrors, which is pathetic given that competiting maruti SX-4 has body colored ones in their base model. The idea of projecting understated elegance and german engineering could have been thought out better. I guess VW is trying too hard to project their premium image.


7 years ago

Dear Anil ,
Is there any Non - Soap, Detergent , Washing powder ad that you have liked?

An Car ad is just a book mark, reminder when we are actually looking at all options to buy. It is not the driving factor. This ad does that job well.
This much better than the horrible ads for punto, swift, alto, indigo, scorpio, verna ...

Sunil Date

7 years ago

No comments on the TataSky ad ? It implies that one can select channels of ones choise and will not be forced to opt for other channels; in reality it is not so.


7 years ago

Exactly...you said it Anil. Its pathetic...the VW seriously need to look out for other creative agency.

BTW....Neeraj...wake up kid.Here it appears like you are taking out your frustration, rather than the author. Read other articles by Anil where he has also lauded some ads. And off course no need to go personal against anyone, unless you share a wall between your home at Pune with the other person.


7 years ago

Oh God... why does money life not change its name to Critics Magazine...
I have hardly seen you guys praising a single person in this world....
The paper add of Vento which was seen as a new innovation for the marketing world was a crap for you......
The author of the story seems to be a frustrated person in his real life... who might be suffering with all sorts of personal problems... so he can only spit venom and nothing else...



In Reply to Neeraj 7 years ago

hey I think that is a brilliant idea...Critics Magazine. Except I like Moneylife better and I don't see why Neeraj attaches a "Oh God" to it. If you want to read PR puff pieces, why not read your daily morning paper -- which is a three in one product with large supplements?
I think someone that dares to criticize -- especially advertisers and companies (advertisers again) need to he lauded for their courage.
Unless Neeraj comes from another planet where those who are being criticized would pay someone like Moneylife for holding up the mirror to them and their so-called "creativity".
Way to go thakraney! lage raho... as long as you are allowed to do so. Ignore the Neeraj's of the world.


In Reply to salim 7 years ago

Critical comments is allowed in democracy but there should constructive criticism...
If u r criticising the wrong that is fine...
But Salim it seems you are quiet acquainted with their style and love to see only the negative aspect...
Learn to appreciate.. otherwise you will also be bugged in your life the way you like to do with others....


7 years ago

I disagree with your opinions which I feel are the result of a biased mind. Perhaps you dont like the V W brand as a whole which makes u find lame defects. The whole media and auto experts are looking at vento as a tough competition for Honda City and you think the car is not feature packed? If u buy a car based on the plastic used, color and the outer design, u may be right in YOUR opinion. Vento and V W is all about innovation, performance , driving pleasure , convenience and safety. Its sad to see that some one is taking time out to blame on a well crafted machine, telling that the advertisement sucks. In my opinion, you have a bad taste buddy.

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