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Budget 2012: Takeaway for Microfinance Institutions- Shadab Rizvi Microfinance Institutions were not expecting much from

the Budget as the Regulator (and hence the Government) had already intervened positively on various issues many times this Financial Year. The only question that MFIs possibly wanted answered from the Budget Speech of the Finance Minister was the timing of the introduction of the much awaited Microfinance Bill. Though this wish was largely fulfilled, a few other announcements would have surely caught the attention of the MFIs. Hereunder, we list out and discuss noteworthy points for MFIs from the Budget Speech of the Finance Minister.. Qualified Foreign Investors Qualified Foreign Investors (QFIs) will be allowed to access Indian Corporate Bond market QFIs or simply Foreign Residents, Body Corporate and Associations are currently not allowed to access Indian Corporate Bond Market. With a view to widen the class of investors, attract more foreign funds to deepen the Indian capital market, the Finance Minister has announced that QFIs can directly invest in Indian Corporate Bond market. This is positive news for MFIs as many Microfinance focused Foreign Individuals, Corporate and Associations either did not participate or had to resort to complex multination structures so as to be able to invest in debt offerings of Indian MFIs. Also, the definition of QFIs is quite wide. The Mutual Fund Circular defines QFIs as a person resident in a country that is compliant with Financial Action Task Force (FATF) standards and that is a signatory to International Organization of Securities Commission's (IOSCOs) Multilateral Memorandum of Understanding, provided that such person is not resident in India, provided further that such person is not registered with SEBI as Foreign Institutional Investor or Sub-account. (Please note that QFIs have been already permitted to directly access Indian Equity and Mutual Fund market pursuant to the Budget announcement 2011-12). As a majority of the countries are compliant with the FATF standards and are the signatories to the IOSCOs multilateral memorandum of understanding, a large group of foreign investors will have direct access to the Indian Corporate Bond market and hence debt offerings of MFIs. Priority Sector Lending (PSL) Guidelines Revised guidelines on priority sector lending to be issued after stakeholder consultation Though the Finance Minister did not give a clear indication about the time by which the new guideline would be out, the mention of PSL guidelines in the Budget Speech reflects the seriousness of the regulator (and the Government) in this regard. Therefore, it would be safe to assume that most of the recommendations of the Nair Committee with regards to priority sector lending will soon be incorporated (with minor changes) in the guidelines.