India’s microfinance firms scramble to react to government’s ban on high-value currency

Friday, November 11, 2016

Microfinance companies, which work in the grassroot level and handle cash more than any other institutions, are in complete quandary on what strategy they should adopt now as far as accepting high value currency notes goes.

Sector leaders like Ujjivan Financial Services have told customers to defer all repayments temporarily while medium-sized Village Financial Services has decided to offer one-day window to customers for repaying loans in old Rs 500, Rs 1,000 denominated currency notes, which ceased to be legal tenders post November 8 midnight.

Companies have also stopped loan disbursement in physical cash, creating gaps in borrowers’ daily cash credit requirements. There are borrowers who get their loans credited to bank accounts directly but the scheme limits cash withdrawal at Rs 10,000.

“Most of our borrowers repay in high value currency notes with the rise in quantum of loans. So, we have advised our borrowers in the morning not to repay loans for some time,” Ujjivan managing director Samit Ghosh told ET.

Source: Economic TImes (link opens in a new window)