TOPIC: Understanding the AP Crisis of 2010 and the Malegam Committee’s
Recommendations and its effect on the MFI Sector INTRODUCTION After the liberalization of India’s economy in 1991, the private sector increasingly started to extend the credit to the subprime borrowers to fill the gaps created by Banks’ reluctance to step in. Soon, the Indian MFI sector saw itself being one of the largest in the world and, more importantly, saw Andhra Pradesh at the hub of this growth story. But soon, the sector witnessed huge defaults at the hands of their borrowers, forcing the entire industry into a crisis. The government saw many instances of coercive lending practices and exorbitant interest rate levied on the borrowers Following this, the Malegam committee was set up and the various provisions were made concerning monitoring and managing operations of the MFI sector as well as protecting the interest of the borrowers. OBJECTIVE This report will critically examine the events that led to the crisis, the policy decisions that followed and how the MFI Sector shaped up in the year following the crisis. Below is the structure of the report. STRUCTURE 1. ABSTRACT: A Brief about what the report is all about and what it is going to cover. 2. INTRODUCTION: A brief background of the MFI Sector, its History, and how it was instituted in the country and the guidelines which monitored the sector before the crisis. 3. BACKDROP OF THE AP CRISIS: The incidents, decisions, and path that lead to the AP Crisis. 4. THE CRISIS EXPLAINED – ANALYSIS: The Crisis explained in detail with the help of secondary research and data and understanding the effect of the extent of the crisis on the entire NFBC sector, specifically the MFI Sector. 5. MALEGAM COMMITTEE RECOMMENDATIONS: Understanding various regulations and guidelines issued by the Malegam Committee and various revisions of the same in the context of the crisis and analyzing the decisions made in terms of the long-term repercussions. 6. THE RECOVERY OF THE MFI SECTOR – THE AFTER EFFECTS: The after-effects of the Malegam Committee recommendations and various regulatory provisions. 7. INDUSTRY’S OPINION ON THE TOPIC: In this section, we will get an Industry Perspective on the entire issue and try to understand the crisis through the Lens of the MFI Leadership. 8. THE ROAD AHEAD: Here, we will briefly discuss how the MFI sector has moved forward since then and taken some of the broader steps related to sustainable growth. 9. CONCLUSIONS AND RECOMMENDATIONS: We will sum up the report and give our recommendations if any.