The Reserve Bank of India (RBI) has advised the banks to make some changes in its present reform guideline. This is done so that they can extend credit support to micro finance institutions (MFIs).

In this reform, the RBI has relaxed rule for restructuring of bank loans to MFIs and extended the special regulatory asset classification benefit to such restructured accounts up to March 31 as stated by the RBI on in a press release.

As per the rule, the accounts need to be fully secured to get benefit of the special regulatory asset classification benefit; however the RBI has given this relaxation even to those accounts which are not fully secured. This is done because the problems which cause the MFI sector are mainly due to environmental factors rather than on account of any credit weakness.

To set all other condition there will be need of a contract for the special asset classification benefit. The RBI has said that it would prefer an association approach to restructuring very soon.

A consortium advance for restructuring may be chosen and for this all the banks financing a MFI unit should come together. They would decide on the course of action to be tracked for that unit as stated by the central bank.