MFIs in India should be allowed to accept deposits from public: Nobel laureate Muhammad Yunus

Nobel laureate Muhammad Yunus said that micro-finance institutions (MFIs) in India should be allowed to accept deposits from the public.

Speaking at the 'PanIIT Global eConclave', the social entrepreneur said that at present MFIs have to go to the banks for money.

"My plea to the Indian government is that MFIs should be allowed to accept deposits from the public. Now, they go to the banks for money," Yunus, the founder of Bangladesh-based Grameen Bank, said on Sunday evening.

He said that the Reserve Bank of India (RBI) has allowed the opening of small finance banks who are able to accept deposits.

Many MFIs such as Ujjivan and Jana have converted into small finance banks after getting licenses from the RBI.

"Finance is the economic oxygen of people. The banking system is not keen to lend money to the poor for which an alternative banking channel has to be developed for them," he noted.

As MFIs are not allowed to accept deposits, the cost of funds at the hands of the beneficiaries become high because they borrow money from banks -- SIDBI and NABARD.

Raising concerns that many MFIs may become "loan sharks", Yunus said the sector should be defined as a "social business" and also pitched for zero dividend-paying entities.

Yunus was awarded the Nobel Peace Prize in 2006 for his works in microcredit and microfinance.