Based on the recommendations of which Committee was the creation of a separate category for NBFCS operating in the microfinance sector (NBFC-MFI) done?

The correct answer is Malegam Committee.

Key Points

•  The creation of a separate category for NBFCs operating in the microfinance sector (NBFC-MFI) was done based on the recommendations of the Malegam Committee.
• The Malegam Committee was appointed by the Reserve Bank of India (RBI) in 2010 to review the microfinance sector in India and provide recommendations for its growth and development.
• The committee recommended the creation of a separate category of NBFCs for microfinance to regulate and supervise them effectively, and to ensure that they comply with the prescribed norms and standards.
• The NBFC-MFIs are required to obtain a certificate of registration from the RBI and comply with the regulations on interest rates, lending practices, borrower protection, and reporting requirements.

Additional Information

•  Narasimhan Committee:
  • It was appointed by the RBI in 1991 to review the financial system in India and provide recommendations for its reforms.
  • It recommended the creation of a four-tier banking system, the establishment of asset reconstruction companies, and the liberalization of the banking sector.
• Deepak Parekh Committee:
  • ​It was appointed by the RBI in 2018 to review the existing framework for the MSME sector and suggest measures to strengthen it.
  • It recommended the creation of a distressed asset fund, the simplification of the loan application process, and the enhancement of credit guarantee schemes.
• PK Mohanty Committee:
  • It was appointed by the RBI in 2013 to review the regulatory framework for the NBFC sector and suggest measures to enhance its stability and development.
  • It recommended the creation of a new category of NBFCs for infrastructure finance, the enhancement of risk management practices, and the strengthening of the supervisory framework.