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Apex Financing Institutions:
Growing the Seeds
and Saplings
12 Of the latter, civil suits have been filed against 210 and 217 have been blacklisted on the RMK website.
It is not clear what the extent of overlap is between the two categories.
13 24 percent of loans were overdue for more than three years, 14 percent for more than, 14 percent for
more than one, and 42 percent for less than one. The auditors use the standard banking system of
classifying overdues into sub-standard, doubtful and loss. They suggest a provisioning requirement of
100 percent for loans overdue for more than three years. The entire amount of overdues are covered
by a risk fund of 9 crores , built up out of transfers from surpluses each year, which are overstated
since they do not include provisioning expenses, and enable RMK to earn interest on its risk fund
deposited in the banks.
14 Most FWWB borrowers qualify however for the 0.5 percent on-time repayment rebate.
15 The onlending rate cap was 12 percent, which has now been increased to 18 percent. There was
however a 1 percent rebate for timely disbursement and 0.5 percent on timely repayment, giving MFIs
an effective margin of 5.5 percent In addition there was a 1 percent rebate on expenditure by the
partner on training. However few partners qualified for it. One of the most irksome procedures was
having to furnish the entire list of prospective borrowers.
16 RMK no longer sees itself as a capacity building organization. The chapter on promotion and development
has been dropped from the 2005 annual report. The policy enunciated in the previous report was that
"RMK will provide capacity building assistance up to a maximum of 10 percent of loan sanctioned."
17 39 NOAs have been identified in 21 states. They will get performance incentives of 1 percent on
disbursements and 1 percent on recoveries. The individuals selected will get a remuneration of Rs 5,000
ar month apart from TA/DA.
18 It must be recognized that RMK is handicapped by government procedures. The disadvantages of
having IAS officers as CEOs is that their tenures are typically too short to provide continuity and the
accumulation of expertise in a highly professional activity, no matter how capable and talented they
may be. However there are advantages too, especially if the CEO is supported by strong permanent
senior management, and suitable candidates may well present themselves from within government. The
PKSF of Bangladesh provides a possible model, which although publicly funded, is governed by a board
with strong representation of prominent sector leaders, and has a CEO drawn from the sector, who is
not subject to the vagaries of the civil service system.
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