State of Microfinance in J&K - KashmirCorps

APPENDIX I (Continued)
Regulatory Norms
1. What are the regulatory norms enforced by the bank as recommended by the Reserve
Bank of India and other globally recommended principles on micro financing
• As per the Section 22 of the Banking Regulation Act, does the bank conform to the
regulation of opening 1 rural bank for every 3 urban banks In other words, are 25%
of its branches in rural areas as an agreement to the licensed issued to them
• Is 40 percent of the bank credit issued to priority sectors as per another RBI norm
• Is 18% of the bank credit issued to agricultural areas, with 13.5 percent directed to
farmers directly
Addressing Problems with Microcredit
1. What are the transaction costs involved in giving out a loan (Screening, administration of
loan, staff, etc.)
• Do you think these transaction costs are manageable or do they inhibit the quality and
quantity of the loan
• If this is high, how has it affected the amount and number of loans given out
• If this is high, have there been any policies in place to circumvent this What are
these
2. How has microcredit in Kashmir attempted to address the risk of moral hazard inherent in
giving out loans to people with fewer resources
• What happens if clients can repay but do not use the loan for what they stated they
would before taking it out Are there consequences
• What if they use the loan for what they originally intended but cannot repay Are
there consequences
• Is there a monitoring process, and, if so, what does it look like
• How has this problem affected the size of the loan
• What kind of screening is in place to select loan recipients
• Microcredit is used to help those who have no access to collateral. What kind of
security does your institution have if loan recipients default
• Have there been other, non-monetary schemes in place for lending such as buying
equipment instead of handing out cash sums and if not, would you consider this
What are the transaction costs of this
3. In many rural areas throughout India, there exists an informal money market in which
moneylenders charge high interest rates to the poor. To what extent has the informal
sector eroded the financing sector for rural households
• What are the problems with this informal sector
• How much of clientele is lost through the existence of the informal sector
• Why would clients prefer to receive loans from the formal sector How much lower
are interest rates
• What is the proportion of the total outstanding cash dues of rural households to the
informal sector
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